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Graduate Student Theses, Dissertations, & Professional Papers Graduate School

1976

Growth of the Circle K Corporation a convenience food store chain

John Clinton Lowry The University of Montana

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Recommended Citation Lowry, John Clinton, "Growth of the Circle K Corporation a convenience food store chain" (1976). Graduate Student Theses, Dissertations, & Professional Papers. 6135. https://scholarworks.umt.edu/etd/6135

This Thesis is brought to you for free and open access by the Graduate School at ScholarWorks at University of Montana. It has been accepted for inclusion in Graduate Student Theses, Dissertations, & Professional Papers by an authorized administrator of ScholarWorks at University of Montana. For more information, please contact [email protected]. THE GROWTH OF THE CIRCLE K CORPORATION;

A CONVENIENCE FOOD STORE CHAIN

By

John C. Lowry

B,S., Tennessee Technological University, 1968

Presented in partial fulfillment of the requirements for

the Degree of

Master of Business Administration

UNIVERSITY OF MONTANA

1976

Approved by;

Clhd.rman. Board of Examiners

Deanx^radu^tTe"'School

^ / 9 7 / é Date / UMI Number: EP36936

All rights reserved

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ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 4 8 1 0 6 - 1346 TABLE OF CONTENTS

Chapter I. PURPOSE, OBJECTIVES, AND BACKGROUND ANALYSIS OF THE CONVENIENCE FOOD STORE INDUSTRY...... 1

II. DESIGN OF THE S T U D Y ...... 15

III. THE CIRCLE K CORPORATE STRUCTURE...... 17

IV. POLICY, PROCEDURE, AND EMPLOYEE BENEFITS .... 25

V. FINANCIAL ANALYSIS ...... 32

VI. SUMMARY ...... 42

Appendix 1. GROWTH C H A R T S ...... ' ...... 51

2. GEOGRAPHICAL CORPORATION AREAS...... 57

3. PERSONNEL EVALUATION P O L I C Y ...... 64

4. INVENTORY PRICE M A R K U P ...... 69

5. CORPORATION GUIDELINES AND BREAKEVEN ANALYSIS . 73

6. PRINCIPLES OF SALE/LEASEBACK ...... 79

7. CONTRACT AG R E E M E N T ...... 8 5

8. PRO FORMA STATEMENTS OF PRESENT AND FUTURE G R O W T H ...... 100

9. QUESTIONNAIRE ...... 109

SOURCES CONSULTED ...... 113

111 CHAPTER I

PURPOSE, OBJECTIVES, AND BACKGROUND

ANALYSIS OF THE CONVENIENCE

FOOD STORE INDUSTRY

The primary objectives of this study were: (1) identi­ fying, (2) describing, and [3) evaluating the various factors which have led to the development and rapid growth of the convenience food store industry with the Circle K Corporation being emphasized and highlighted.

The growth and development of the convenient food store industry in the United States has been one of phenomen­ al proportions. Since its beginnings in the late 1940s and early 1950s, the^convenient food store industry has grown by unbelievable leaps and bounds and now encompasses the entire nation.^ Among the top names in the industry are the South- 2 land Corporation (7-Eleven) with 4,787 stores, Munford, In- 3 corporated (Ma-jik Markets) with 1,151 stores, and the Circle

K Corporation with 862 stores.^ Besides these top three

^’’The Circle K Story," Convenience Store Journal 9 (February 1973): 9. 2 "Annual Convenience Stores Franchise Guide," Con­ venience Store Journal 9 (September 1973): 34-35.

^Ibid.

"Circle K Box Score," Counter Talk 10 (October- November 1973): 1. 2

leaders in the industry, there are numerous smaller corpora­

tions involved in the convenience food store business.

It was the purpose of this study to answer the ques­

tions of why this industry has grown so rapidly in such a very

short period of time and whether its growth will be sustained.

The rapid growth of the convenience food store industry

is evidenced by referring to the growth charts in Appendix 1.

These growth charts, which illustrate the growth of the South­

land Corporation, Munford, Inc., and the Circle K Corporation,

are descriptive of the rapid pace at which the convenience

food store has become a viable retailing industry in our

economy.

For 1973, grocery sales increased by 22.5 per cent,

and the number of convenience food stores increased by 15.3 per cent to 20,300. The convenience food stores accounted

for approximately 3.8 per cent of total grocery sales with

the average convenience store having annual sales of $215,000.'

Total grocery sales for 1973 were $98 billion with the con­ venience food store industry accounting for approximately

$4 billion of the total,^

The convenience stores developed in the Southwest dur­

ing the 1930s. They operated on a seven day week basis with operating hours being from seven in the morning until eleven

^"Food Retailing," Standard G Poor's Industry Surveys, (New York, N.Y.: November 14, 1974), p. R172.

^Ibid., p. R166. 3

at night. In return for quick service and long operating

hours, the convenience store is able to command high selling

prices. Due to the quick rate of turnover and moderate inven­

tory requirements, the convenience stores earn a substantial- n ly higher return on sales than a supermarket would earn.

The rapid expansion of new stores has been aided by

the small investment needed and low preopening costs. Over­

head is not used for large advertising outlays or other pro­

motional costs. Also, most stores purchase from local whole­

salers or cooperatives thus eliminating warehousing and g delivery costs.

The increasing percentage of the American population

living in suburbs has also helped stimulate growth. Thus,

the need for a small, convenient, all-purpose retail outlet g is much greater in the suburbs than in the central city.

Another important factor is the increase of working

housewives. These women have less time to spend shopping in

a large grocery store and are more concerned with the ease and

convenience of shopping in a convenient food store. This

trend is expected to continue through the 1970s.

Increased leisure time and recreational activities ex­

plain the high level of sales on items such as beer (11.5 per

cent of sales), soft drinks (9.1 per cent), and snacks (3.3 per cent). This increase is also expected to continue with

^Ibid., p. R172. ®Ibid.

®Ibid. l°Ibid. the advent of the four-day work week and a recreation-minded population.

The maps in Appendix 2 present a geographical picture of the states in which the Southland Corporation, Munford,

Inc., and the Circle K Corporation operate convenience food stores. Where stores compete with each other in the same state, there are usually covenants between the competing cor porations which give distance restrictions between stores.

Circle K competes with 7-Eleven in many states with an agree­ ment which states that their stores must be built at least 12 one-fourth of a mile from each other.

The convenience store started to become a significant factor in American food retailing during the 1950s, It did so by capitalizing on some of the disadvantages of shopping at supermarkets which are listed as follows:

1. Supermarkets are located in busy traffic areas.

2. To get to the supermarket from where they have parked their car, customers often have to walk a long distance.

3. Customers cannot receive personal service in a supermarket because the employees do not know them.

4. Before going to a supermarket, customers often feel they should change into acceptable clothing instead of going as they are to do their shopping.

1 2 Interview with David Barker, Circle K Corporation, Great Falls, Montana, 22 November 1974. 5. Because of the long lines of customers, getting an order checked out in a super­ market often takes a long time.

6. Customers with small orders often have trouble getting their orders checked out quickly.13

In 1970 approximately 5 per cent or 12,000 of 230,000 retail food stores in the United States were convenience stores. The prediction made for 1975 was for 20,000 conven­ ience stores to be operating with sales in the neighborhood of $3.5 billion.This prediction was surpassed in 1973.^^

The net profit of a typical convenience store is be­ tween three and six per cent whereas the net profit for a supermarket is between one and two per cent.^^ In compari­ son with the big chain supermarket averaging approximately

$1.2 million in sales per year, the typical convenience food store averages between $150,000 to $170,000 in sales per 17 year. It should be noted that the average inventory cost for a convenience store is between $10,000 and $15,000 while 18 it is between $65,000 and $70,000 for a supermarket.

13 The Convenience Store: A New Dimension to the Food Industry (Chicago: The Quaker Oats Company, 1970), p . 23.

^‘’ibid. , p. 26.

^ Food Retailing," Standard § Poor's, p. R172.

^^The Convenience Store, p. 65.

^^"The Return of Mom and Pop,” Forbes, 1 July 1969, p . 38. 18 The Convenience Store, p. 54. 6

Most shoppers need to add to their large food pur­

chases from week to week with items they have forgotten, run

out of, or find that they suddenly need. This need is met

by the convenient store. Some advantages of the convenient

food store are as follows:

1. Convenience stores are located on main traffic routes or just off main traffic routes where customers can reach them easily.

2. Parking is practically at the front door of the store.

3. The small and simple layout of the store allows the customer to find items quickly and conveniently.

4. The hours of operation allow for customers to make purchases when supermarkets are closed.

5. By providing many product lines, customers can purchase many items found in supermarkets without having to go out of the neighborhood.

6. The convenience store can provide customers with fast service that is courteous and friendly.

Of 9,600 convenient food stores in operation in 1968,

approximately one-half belonged to the top three convenient 2 0 food store corporations. Through use of corporate data

and statistics, an historical background of the Southland Cor poration, Munford, Inc., and the Circle K Corporation can be presented.

p. 43. 2f) "The Return of Mom and Pop," Forbes, p. 38. 7

The Southland Corporation of Dallas, Texas is credited with introducing the convenience food store. The father of the current Southland, Chairman John P. Thompson, brought to­ gether several Dallas ice companies in 1927 to form the South­ land Ice Company. He then began adding food items such as milk and butter in the ice houses. By 1945, the ice business grew into a chain of open front grocery stores called 7- 21 Eleven for their hours of operation.

The Southland Corporation is now the largest operator and franchiser of self-service convenience food stores. They 22 are also a major processor and distributor of dairy products.

By December 31, 1973, there were 7-Eleven stores operating in thirty-nine states, the District of Columbia, Canada, and Mex­ ico. Of a total of 4,801 convenience food stores, 1,923 are franchised. Most units are open from 7:00 a.m. until 11:00 p.m every day including Sundays and holidays. There are also some units with heavy consumer traffic which are open twenty-four hours daily.

Southland also expanded abroad in 1971 with the pur­ chase of a half-interest in a chain of approximately 350 spe­ cialty shops located in England and Scotland. They have

7 2 "Southland Corporation," Standard New York Stock Exchange Stock Reports (New York: Standard and Poor’s Corpor ation, 21 August 1973), p. 1. 23 The Southland Corporation, Annual Report, 1974, p . 2. 8

similar opening and closing hours to the 7-Eleven stores and

sell mainly candy, tobacco products, newspapers, and maga­

zines. Early in 1972, the company purchased a half-interest

in a troubled grocery chain of 1,100 stores in England and was able to return the stores to a profitable operation.

Southland also has plans for future expansion into Europe, probably in France and West Germany.

The convenience resulting from location and long oper­ ating hours has boosted Southland’s sales from $179 million

in 1961 to $1.1 billion in 1971,^^ and a record $1.4 billion

in 1973.26

The company also has expanded its non-7-Eleven opera­ tion of fleet leasing and dairy product processing opera­ tions. Barricini and Loft’s Candy Shops, Gristede’s Food

Stores of New York City, and several other regional conven- 2 7 ience store chains are controlled by Southland.

In 1969, in an effort to combat rising costs and grow­ ing competition, the Southland Corporation hired the retiring

Chief of the Army and Air Force Exchange Service, Brigadier

General Joseph S. Hardin, to help develop a distribution

^^”The Threat to Southland’s Growth,” Business Week, 28 October 1972, p. 62.

26ibid., p. 60.

The Southland Corporation, Annual Report, 1973, p . 1.

^^’’Threat to Growth,” Business Week, p. 62. 2 8 system to replace the private supply houses being utilized.

The first regional warehousing facility was opened in

August 1971 in Orlando, Florida, with 160,000 square feet of space. It is the distribution point for Florida and surround- 29 ing areas. A second distribution center of 308,000 square feet opened in Tyler, Texas, in August 1973 and serves stores in Texas, Arkansas, Louisiana, Mississippi, and western Tennes see.^^ A third regional center opened in late 1973. It is

Fredericksburg, Virginia, and is the largest with 478,000 square feet of floor space.

Herbert E. Hartfelder is the current president of the

Southland Corporation. Since he took over the company ten years ago, he has developed it into a billion dollar corpora- 3 2 tion with earnings of $23 million. Hartfelder is constant­ ly looking for future growth and is steadily strengthening his top and middle management. He is utilizing things such as management games and closed circuit television presenta­ tions at the company’s training center in Dallas. He is now in the process of inserting a couple of layers of management to prepare for the expanded growth. He states that he will be overstaffed for a while but that it is essential because

^®Ibid., p. 61. 29 ’’Southland Corporation,” Convenience Store Journal 9 (September 197 3): 42.

^°Ibid.

^^Ibid., 43. 32 Southland Corporation, Annual Report, 1973, p. 1. 10 a billion dollar company is not built like a $100 million 33 company.

Munford, Inc. of Atlanta, Georgia, is the operator of the second largest convenience food store system in the United

States. Besides this business operation, it also operates cold storage warehouses, ice plants, building supply outlets, and gift stores.

Their convenience stores operate under the names Jack­ son's Minit Markets, Ma-jik Markets, and E-Z Food Shoppes.

They are located in eleven southern and southeastern states and specialize in sales of such fastmoving items as dairy pro­ ducts, bread and bakery products, soft drinks, beer, and many nonfood items. The convenience food store operation has ac­ counted for approximately 8 0 per cent of the company's sales while the other 20 per cent in sales has come from the opera­ tion of their cold storage division, ice and coal division,

Do-It-Yourself building supply stores, and World Bazaar im­ port stores.

In 1971, Munford entered into a deal with the Cities

Service Petroleum Company so the convenience stores would al­ so have gas pumping facilities for their customers. The deal was administered in three phases. First, gasoline pumps would

^^"Threat to Growth," Business Week, p. 62.

^^"Munford, Inc.," Standard New York Stock Exchange Stock Reports (New York: Standard and Poor's Corporation, 14 September 1973), p. 1.

, p. 2. 11

be added to existing Munford convenience stores; secondly,

Munford would add stores to existing CITGO stations; thirdly,

Munford and Cities Service would construct all new conveni­

ence stores with gas stations. It is estimated that added profits could range between 25 per cent and SO per cent. The main reason for this is that in a combination store of this

type, the customer could charge groceries on his oil company

credit card.^^

Executive Vice President Robert Blythe stated that

Munford plans to expand north and west at the rate of one 37 hundred stores a year. In 197 2 the company had a record

$155 million in sales. This figure was expected to rise by

25 per cent in 1973 due to the opening of two hundred new con­ venience stores which is above the expected number per year 3 8 stated previously by Mr. Blythe. The 1973 sales figure was 39 $198.5 million which was very close to the expected goal.

The Circle K Corporation, a Texas corporation with its headquarters in Phoenix, Arizona, has grown from three stores in 1951 to the high ranking of third in the industry by 1972.

At the end of 1972, the company was operating 740 stores in the states of Arizona, California, Colorado, Idaho, Montana,

^^"Climbing Aboard," Forbes, 1 November 1971, p. 65. 3?Ibid. 38 "Munford, Inc.," Standard New York Stock Exchange Stock Reports, p. 1. 39 Munford, Inc., Annual Report, 1973, p. 13. 12

Oregon, New Mexico and Texas. The company extended its ter­

ritory into Oklahoma and Kansas with the purchase of twenty-

six Quick-Shop Stores in February of 1973.^^

In November of 1973, the company announced plans of

moving its operations into Utah. This resulted in the eleventh

state of operation for the company and necessitated the estab­

lishment of a new division. Plans are in the making for a

great many stores to be built in and around the Salt Lake City 41 area.

Through a conversation with David Barker, Assistant

Vice President and Area Manager to Montana for Circle K, it was learned that the company would expand its operation into

Washington with the opening of stores in the Spokane area in

December of 1974. This was the twelfth state for Circle K

and Mr. Barker forsaw a great expanse of operations in this

area developing over the next few years.

The Circle K stores sell foodstuffs, alcoholic bever­

ages, health and beauty aids, ice, newspapers, magazines, and many other miscellaneous items. Over half of the stores oper­

ate self-service gasoline pumps and such services as check

^^”The Circle K Story," Convenience Store Journal: 9.

^^"Circle K Moves Into Utah," Counter Talk 10 (October- November 1973): 4.

^^Interview with David Barker, Circle K Corporation, Great Falls, Montana, 22 November 1974. 13 cashing, and selling of money orders and film processing have become regular features.

All stores are self-service, cash and carry. They are open from 7:00 a.m. until 11:00 p.m. daily and some are open twenty-four hours per day. Sales are mainly directed toward early and late shoppers and those who shop on weekends and holidays. Most sales involve only two or three items. Items carried in the stores are usually priced higher than in the 44 supermarkets.

Circle K ’s growth plans called for one thousand stores to be either open, under construction, or construction pending by April 30, 1973, the end of their 1973 fiscal year.^^

Mr. Barker confirmed that this goal was achieved and that the growth plans for Circle K called for even greater expansion 46 in the future.

Circle K began construction of a new corporate office and distribution center complex in Phoenix in order to meet the mounting needs of the convenience stores. It was complet­ ed in the spring of 1974 and provides 35,000 square feet of 47 space. Distribution activities in the new complex consist

"Circle K," Standard American Stock Exchange Stock Reports (New York: Standard and Poor’s Corporation, 11 Sep­ tember" 1973), p. 1. 44%bid.

^^"The Circle K Story," Convenience Store Journal: 9.

^^Interview, Mr. David Barker, 23 November 1974.

^^"The Circle K Story," Convenience Store Journal: 9. 14

of a general merchandise division, dairy division, print shop, and a new ice plant. Provisions were also being made for eventual expansion of the facility to 80,000 square feet.^^

While it took fifteen years to achieve the $100 million mark in sales. Circle K attained 58 per cent of its sales vol­ ume in the last three years. With current projections for the future, the company expected to reach the $200 million mark by 4 9 the end of fiscal year 1974. The sales figure at the end of fiscal year 1974 was $192 million which was $8 million short of the projected figure.

‘*®Ibid. , p. 15.

^®Ibid., p. 20.

^^The Circle K Corporation, Annual Report, 1974, p. 11. CHAPTER II

DESIGN OF THE STUDY

It is evident from the background analysis that the convenient food store industry has been very profitable for the Southland Corporation, Munford, Inc., and the Circle K

Corporation. It is also evident that these companies are planning for great expansion in the future.

As stated in the objectives of this study, the Circle

K Corporation will be emphasized in depth in this paper. The writer has identified, described, and evaluated information pertaining to Circle K ’s past, present, and future growth.

Of great importance was the use of interviews to gain a bet­ ter understanding of the methods of decision making and prob­ lem solving utilized by Circle K officials.

In an effort to study the operation of the corporation through its different chains of responsibility, interviews were conducted with David Barker, Assistant Vice President and

Area Manager for Montana, William Anderson, Division Manager for Montana, and Guy Dodge, Zone Manager for Great Falls,

Montana. The main areas of interest in these interviews were personnel policies and procedures, problem areas, and middle level decision making techniques.

15 16

The use of computer programs was also helpful in analyz­ ing the position of Circle K in the convenience food store in­ dustry. Through the use of these programs, a financial analy­ sis was conducted involving Circle K, the Southland Corporation, and Munford, Inc. The data utilized in the analysis transmit­ ted information pertaining to past, present, and future growth patterns. Such information was helpful in forecasting the growth of Circle K.

The sale-leaseback arrangement of store acquisition was studied in depth through the cooperation of Mr. Barker and Mr. Mark James Mead, Area Office Manager. Mr. Mead also provided material concerning the contract-operated stores.

Lastly, through the cooperation of Guy Dodge, Zone

Manager for Great Falls, a survey questionnaire was placed in the nine Circle K stores located in Great Falls in an ef­ fort to receive an opinion on how the consumer views Circle K.

This information was analyzed and formulated in a way so that the data could be of use to the writer and to the Circle K

Corporation. CHAPTER III

THE CIRCLE K CORPORATE STRUCTURE

Rapid growth as evidenced by Circle K creates a chal­ lenge to management to keep pace with the increasing complex­ ities of a fast-developing enterprise. Circle K approaches this task with a viewpoint that holds that the decision mak­ ing function works best when the lines of authority remain short, and communications can flow back and forth with free­ dom and a minimum of delay. The corporate management struc­ ture is designed to rest major decisions within two groups of executives. These groups are the Executive Policy Board and the Board of Management. Decisions of policy affecting the long-range plans of the company are decided by the Executive

Policy Board.^ Major policy decisions, modifications in ex­ ternal and internal store designs, new products and product- mix, advertising, promotions and employee programs are examples of functions performed by this board. It is their responsibil­ ity to implement government regulations involving the grocery business and to also keep tabs on inflation and product short- 2 ages.

^”The Circle K Story," Convenience Store Journal: 10. 2 The Circle K Corporation, Annual Report, 1974.

17 18

Operating decisions come under the jurisdiction of the Board of Management. It is the purpose of this board to handle the everyday business of running the operations of the corporation and to make those decisions which affect the oper ating store.^

From top to bottom, Circle K ’s corporate structure ap­ pears as follows:

1. Executive Policy Board (seven top officers of the firm)

a. Fred Hervey, Chairman of the Board

b. Glover W. Beeny, President

c. Robert E. Hutchinson, Executive Vice President

d. Darrell D. Sigfridson, Secretary- Treasurer

e. Robert Charles, Vice-President 4 f. Albert Felix, Vice-President

2, Board of Management (Executive Vice-President and fourteen Assistant Vice-Presidents who are also Area Managers)

a. Robert E. Hutchinson, Executive Vice- President

b. Leonard Mack, Assistant Vice-President, Area Manager, El Paso, Texas

c. Gary Pipkin, Assistant Vice-President, Area Manager, Corpus Christi, Texas

^’’The Circle K Story," Convenience Store Journal: 10.

^The Circle K Corporation, Annual Report, 1974. 19

d. Ernest Espinosa, Assistant Vice-President, Area Manager, San Antonio, Texas

e. Frank Smith, Assistant Vice-President, Area Manager, Amarillo, Texas

£. James Johnson, Jr., Assistant Vice- President, Area Manager, Salem, Oregon

g. Clarence Schabinger, Assistant Vice- President, Area Manager, Boise, Idaho

h. David Barker, Assistant Vice-President, Area Manager, Great Falls, Montana

i. Charles James, Assistant Vice-President, Area Manager, Phoenix, Arizona

j. Fred Kight, Assistant Vice-President, Area Manager, Phoenix, Arizona

k. Donald S. Peak, Assistant Vice-President, Area Manager, Albuquerque, New Mexico

1. Joe D. Clark, Assistant Vice-President, Area Manager, Tucson, Arizona

m. Robert Perona, Assistant Vice-President, Area Manager, Indio, California

n. Jack Kososkie, Assistant Vice-President, Area Manager, Fontana, California

o. Frank Miller, Assistant Vice-President, Area Manager, Carmichael, California^

3. Division Managers

4. Zone Managers

5. Store Managers

6. Assistant Store Managers

7. Clerks^

^Ibid.

6„The Circle K Story,” Convenience Store Journal: 10 20

The Executive Vice-President, Robert E. Hutchinson, is a member of both the Executive Policy Board and the Board of

Management. In this way, major policy decisions of the com­ pany are translated into action with a minimum of red tape.

Mr. Hutchinson is responsible for the supervision of all the area managers and their training in company-held workshops and sales meetings. These workshops are effective in that they strive to better the flow of communications between oper 7 ations in the field and the corporate headquarters.

With 947 stores operating as of April 30, 1974, Cir­ cle K depends on its area, division, and zone managers to keep things running smoothly and efficiently. Area managers operate out of fourteen offices throughout the twelve-state

Circle K territory. (See Appendix 2) Each area manager di­ rects the activities of from one to four division managers.

Each division manager controls from thirty-five to forty stores, on the average, working through zone managers who g directly supervise from eight to ten stores each.

Division managers operate as heads of their division.

Each week the division managers meet with their zone mana­ gers to discuss operational problems and merchandising oppor­ tunities. In the Montana Division, William Anderson, the division manager holds a weekly meeting every Saturday at the Division/Area Office in Great Falls. David Barker, the

^Ibid., 11. g The Circle K Corporation, Annual Report, 1974. 21

area manager, is also usually in attendance for the meeting

with the zone managers. Mr. Anderson is responsible for buy­

ing major product categories for his division and the weekly

meeting serves to review this important function. The zone

manager has actual responsibility to obtain each store’s or­

der requisition, which the store manager develops using the

corporation’s order guide which is updated periodically.

Zone managers are informed prior to the updating of the order

guide so that additions, deletions, and changes can be decid­

ed prior to the new printing. Also discussed at the weekly

meetings are new corporate policy decisions, merchandising

problems, and any other problems connected with store opera- 9 tions.

Lee Borchert, the other division manager under Mr. Bar­

ker, has control of the Eastern Washington and Northern Idaho

Division. Due to the great distances involved for travel be­

tween stores upon the expansion of Circle K into Washington

in 1973, the division which Mr. Borchert heads was created in

order to provide better control over store operations in that portion of the Montana area. Prior to the establishment of

the new division, the Montana Division Manager had control

of the entire area.^^

On the local level, Guy Dodge is the zone manager for

Zone 2511. As manager of this zone, he supervises the

g Interview with David Barker, 7 July 1974. 22 operation of nine stores in Great Falls, Montana and one store in Fairfield, Montana. The major responsibilities of the zone manager are the screening and hiring of applicants for employment, merchandise control, and overseeing the train­ ing of the store employees. Since being a zone manager,

Mr. Dodge has initiated a salary program which establishes a step process for merit pay raises and promotions. (See

Appendix 3] Mr. Dodge stated that merchandise control is the number one problem with which he has to contend. Price changes occur once a week and all items in the store must be updated with new prices. The gross margin of sales on store items ranges from 15 per cent to 40 per cent. The pricing guideline sheets in Appendix 4 are evidence of this. Even though the prices are higher than supermarkets, Mr. Dodge points out that Circle K sells convenience to the customer and does not compete with large food stores with grocery specials.- -, 11

Another problem that Mr. Dodge has is inventory short­ age. He states that only about 2 per cent of inventory short­ age is due to customer shoplifting. The remaining 98 per cent comes from vendor and employee pilferage. The problem with vendor pilferage is being remedied by tighter control over incoming stock. The employee pilferage problem is hard to correct. It is the feeling of Mr. Dodge that the typical em­ ployee making $2.50 per hour feels that he or she is entitled

^^Interview with Guy Dodge, Circle K Corporation, Great Falls, Montana, 28 January 1975. 23 to something extra and therefore takes items out of the 12 store.

Stores were to be operated on a contract basis starting in 1975 with an individual store contract manager controlling the entire operation of his store. Mr. Dodge was then to as­ sume the responsibility of being an advisor to contract mana­ gers in his zone of operation. It was his feeling that the contract system of operation would further reduce employee pilferage since many of the contract operated stores would be 13 run be family members of the contract manager. The concept of the contract operated store will be studied further in

Chapter VI.

In its program of expansion. Circle K has mainly taken the route of expanding internally through new store develop­ ment. Of all its stores in operation, only forty-six have been acquired through acquisition. As the company looks to the future, acquisitions may play an important role in reach­ ing its stated goal of four thousand stores in operation by 1980.14

As it pursues its expansionary policy, the company’s site selection program has become very important. The real estate department employs the professional counseling of real­ tors in its various operating divisions. These men are aware

The Circle K Story," Convenience Store Journal: 18. 24

of the Circle K building program and constantly contact major

builders in the area, analyze promising sites, and gather

necessary information on which to make a decision. Circle K

then follows up by utilizing traffic studies, population trend

studies, and other sophisticated systems of checking out po­

tential sites. Once a site has been carefully studied, the

Corporate President, Glover Beeney, or another member of the

Policy Board, personally approves or disapproves the site.^^

In the 1974 Annual Report for the Circle K Corpora­

tion, the Chairman of the Board, Fred Hervey, states that

"the staff concept utilized by the corporation has matured and the long range plans of steady growth will be attained with confidence to meeting new challenges.

1 r Interview with David Barker, 7 July 1974.

^^The Circle K Corporation, Annual Report, 1974. CHAPTER IV

POLICY, PROCEDURE, AND

EMPLOYEE BENEFITS

The philosophy of Circle K is built around the con­ cept that the overall goal of the corporation is the estab­ lishment and maintenance of a profitable business operation.

In an effort to accomplish this goal, the employees’ indivi­ dual needs are considered very important in order to maximize job satisfaction. The employees are given the degree of re­ sponsibility which will let them feel that they are partici­ pating in the growth of the organization.^

In order to see that the goal of the corporation is carried out, the firm stresses the importance of customer relations to the employee. Customers are to be considered

Very Important People (VIP), and the following should be done in relation to them:

Always greet the customer with a smile and a friendly hello.

Assist the customer in finding merchandise in the store.

Make the customer feel that his business is wanted by both you and Circle K through your friendliness.

1 Interview with David Barker, 7 July 1974.

25 26

4. When the customer comes to the checkstand, offer any extra assistance. Always ask the customer if there will be anything else before ringing up his order. Such sugges­ tive selling shows the customer that you are interested in him and it may also remind him of something he may have forgotten.

5. Thank the customer and ask him to come back again.2

The Munford Corporation has done some studies and has come to find that the average customer is in a convenience food store for only three and one-half minutes and spends

$1.15. In order to see that the customer returns to the store, the customer relations involved are very important.

Personnel Policies

Hiring of Personnel

Applicants for employment with Circle K can either make their initial contact for employment with Circle K at the central office or at one of the stores. If contact is made at a store and the store manager is favorably impressed by the applicant, a recommendation is made to the zone mana­ ger who further screens the applicant. The final decision for or against employment rests with the zone manager. Under no circumstances will anyone under age sixteen be employed by

Circle K.^

2 Circle K Corporation Policy and Procedures Guide, 1973, p. 1. 3 Munford, Incorporated, Annual Report, 1973.

^Policy and Procedures Guide, p. 7. 27

Uniforms

Male employees are required to wear a plain white

shirt, black tie, and dark trousers. Female employees are

required to wear a plain white blouse with a dark skirt or

dark slacks. Shirts and blouses are available at cost

through the company.^

Training

Training and management programs are available for any

employee who wishes to develop himself for advancement in the

corporate structure. Participation in such programs are

noted on the employee performance rating sheets noted in Ap­ pendix 3.^

Grievance Procedures

When an employee feels that he or she has a logical

and legitimate grievance or complaint, the company procedure

as outlined below is to be followed:

1. The employee must state his grievance in writing, giving full details to his supervisor.

2. The immediate supervisor will take neces­ sary action to settle the grievance.

3. If the grieved is not satisfied, both the grievance and immediate supervisor's action will be given to the Area Manager for pro­ per action.

^Policy and Procedures Guide, p. 7.

^Ibid., p . 8. 28

4. A grievance which cannot be alleviated by the supervisors will be given to the area grievance committee for final pro­ cessing. 7

General Rules

The Circle K Corporation has established certain rules and regulations which are to be followed by all employees.

It is important to the corporation that the rules be follow­ ed so that the human element, which contributes to the growth o of the firm, can be maximized. The following is a list of offenses which can bring about consideration for dismissal:

1. Possession of, or drinking, alcoholic beverages on the premises, or posses­ sion of narcotics.

2. Repeated tardiness or absenteeism.

3. Dishonesty of any kind.

4. Violation of fire, safety, and civil regulations.

5. Selling alcoholic beverages to minors.

6. Misconduct, such as defacing property, fighting, gambling, loafing, sleeping on the job, or possession of lethal weapons while on the job.

7. Taking company property without authori­ zation .

8. Insubordination, or being discourteous to customers or fellow employees.

9. Falsifying time sheets or other records.

7 Interview with David Barker, 7 July 1974.

®Ibid. 29

10. Inability to secure or maintain a health certificate. 0 11. Violation of any announced company policy.

Employee Benefits

The Circle K Corporation feels that the benefits provided its employees are very equitable and are comparable

to the benefits supplied by competitors. Following is a list

of all benefits enjoyed by Circle K employees with a brief description of each:

1. Paid holidays--The corporation observes six paid holidays annually. They are New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Should any of the above holidays fall on a Saturday, it will be observed on the Friday preceding it. Should the holiday fall on a Sunday, it will be observed on the following Monday.

2. Group life insurance--There are two types of life insurance available to Circle K employees. They are term life and perman­ ent life. The term life covers the employee while employed by the corporation. The per­ manent life which also covers the employee while employed by Circle K can be converted to a private policy upon termination of em­ ployment. The company pays one-half the pre­ mium of the term life insurance and pays a portion of the permanent life insurance.

3. Sickness and accident indemnity--The company makes available an insurance plan covering two-thirds of the salary of an employee if he or she is off work because of illness or accident. The company pays one-half of the premium charge for this coverage.

9 Policy and Procedures Guide, p. 9. 30

4. Group health insurance--This health insurance plan is available for the employee and his family. The company pays one-half of the premium.

5. Workman's Compensation insurance--All employees are covered by Workman's Compensation insurance either through the State Industrial Insurance or a commercial insurance company. The cost is paid entirely by Circle K. In addi­ tion to having medical bills paid, if time is lost due to an on-the-job injury, the employee is entitled to a compensation equal to two-thirds of his average weekly base pay. This en­ titlement is paid after a specified waiting period.

6. Fred Hervey Interests Employees Benefit Plan--This plan is established for em­ ployee retirement. The employee must wait three years before he is eligible for the plan. He must then contribute Ih per cent of his gross salary to the plan. The company contributes two dol­ lars for every one dollar invested.

7. Stock Purchase Plan--Circle K common stock may be purchased by a payroll deduction authorization. This gives the employee the advantage of becoming a part-owner and share in the profits of the corporation through stock divi­ dends and appreciation in value. Month­ ly payroll deductions may be authorized in any amount to a maximum of $99. The company pays the brokerage fee and the employee receives a monthly statement of shares accrued.

8. Old Employees Organization--The employee is eligible to join the organization after six months employment. The organi­ zation is formed to promote inter-employee relations. The employee makes a very nom­ inal contribution monthly through payroll deduction. The employee's contribution is matched by the company. The funds are normally used for social activities such as banquets and picnics. 31

9. Employee discounts--When an employee has been employed by Circle K for thirty days, he may purchase merchan­ dise at a 20 per cent discount, ex­ cluding gasoline sales, from any Circle K store.

10. Vacations with pay--After one year of continuous full-time employment with Circle K, the employee will be entitled to a one week paid vacation. After two years continuous employment, the entitle­ ment is two weeks paid vacation. After the fifth year, entitlement is three weeks.

11. Suggestions and Awards--A suggestion and awards committee evaluates employee sug­ gestions and awards cash for those sugges­ tions which result in a direct saving or profit.10

With such benefits offered to the employees, they take part in the growth of the firm. Mr. Barker sums up this im­ portant area by stating, "The growth of the organization

depends on the high degree of employee satisfaction and par­

ticipation. Without good personnel policy and employee bene­

fits, Circle K would not have experienced the rapid growth which it has experienced during the past few years.

^^Policy and Procedures Guide, pp. 3-4.

^^Interview with David Barker, 7 July 1974, CHAPTER V

FINANCIAL ANALYSIS

In order to gain a better understanding of how the corporation handles financial decisions, this paper will now describe the costs of operating stores, breakeven analysis, and the financial analysis used in sale/leaseback decision making.

The tables in Appendix 5 are indicative of the analy­ sis used for store operations. Table 1 is a guideline sheet showing the percentages that a store manager should try to arrive at in order to make a 6 per cent net profit. The guideline percentages were used on Tables 2 and 3 to present the data that should have been presented in order for the stores exemplified to gain a 6 per cent profit. The stores used as examples in Tables 2 and 3 are located in Great Falls,

Montana. The location of each was withheld by the management at the Area Office in Great Falls.

Table 2 is actual annual data for a profitable store during calendar year 1974. By comparing the actual data with the guideline data, the store shows a good operation for the year with a total net profit of $27,744.90 or 8.29 per cent of total sales. In this case, the gasoline sales with a high net profit of $13,572.06 or 21.26 per cent of total gasoline

32 33 sales made up for the low grocery sales of $14,172.84 which was only 5.23 per cent of total grocery sales. It is evi­ dent that without the high percentage of gasoline sales, the store would not have done as well as it did.

Table 3, which is similar to Table 2, shows data for an unprofitable Circle K store during 1974. In this case, the main problem was massive store expenses which accounted for 34.44 per cent of sales. This is far above the guide­ line limit of 19.15 per cent. Due to the large amount of expenses, the store lost $5,959.27 for the year.

Table 4 presents a breakeven analysis for the store which was referenced in Table 2. Table 5 presents the analy­ sis on the store referenced in Table 3. The profitable store made sales far above its breakeven point while, as expected, the unprofitable store fell short of its breakeven point.

The analysis techniques used by the Circle K management do not include guideline comparisons or breakeven analysis.

If such techniques were used, the manager would have a good idea of where the problem areas are in the operation of a par­ ticular store and also be able to make predictions of break­ even sales in order to cover operating costs.

The attention of the paper is directed toward sale/ leaseback. When a company cannot acquire an asset with pre­ sent capital, they may finance its acquisition with debt.

This is done by obtaining the economic value of the asset for the loan payment which will collectively equal the initial cost of the asset plus an interest charge in excess of the 34

initial cost of the asset. The firm would have a legal obli­

gation to make lease payments for the economic value of the

asset or for a well-defined period of time. In leasing, the

total payments the lessee agrees to pay will exceed the pur­

chase price of the asset.

There are two basic methods of lease financing. They

are sale-leaseback and direct leasing. The sale-leaseback

arrangement as used by the Circle K Corporation provides for

the purchase of a store and associated property by a party.

This party then leases the store back to the corporation.

The corporation receives the sales price in cash and con­

tracts with the purchasing party to establish lease payments

during the basic lease period.^ Lessors that utilize this

arrangement are usually finance companies, institutional in- 2 vestors, insurance companies and leasing companies. In the

case of the Circle K Corporation, the Chrysler Realty Com­

pany holds the majority of the Circle K stores in lease. The 3 minority of the leases are held by reliable individuals.

Leasing provides the firm with the opportunity to se­

cure and utilize an asset without incurring the initial costs

and responsibilities of the purchase.^

^Interview with David Barker, 22 November 1974. 2 James C. Van Horne, Financial Management and Policy, 3rd ed. (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1974), p. 576.

^Interview with David Barker, 22 November 1974.

^Thomas C. Committee, Managerial Finance for the Seven­ ties , (New York: McGraw-Hill, IncT, 1972), p . 63. 35

As listed in James Van Horne’s book, Financial Manage ment and Policy, there are several advantages and disadvan­ tages to lease financing. The advantages are as follows:

1. Flexibility. The firm is flexible in that the lease payments occur over time thus avoiding financing through debt which could be more expensive.5

2. Lack of restrictions. Leasing usually has less restrictions than those found in loan agreements.6

3. One hundred per cent financing. Through leasing the firm can use an asset without having to make a downpayment or initial equity investment.? o 4. Treatment in bankruptcy and reorganization.

5. Tax considerations. The lease payment can be deducted as an expense for federal in­ come tax purposes.9

6. Accounting treatment. In a leasing arrange­ ment, the company can use an asset without carrying a liability on the books of the firm. At the present time, all that is need­ ed for an audit is a footnote on the financial statement.10

Along with the advantages just noted there are two major disadvantages that follow:

1. Residual value. Since a company in a lease agreement does not own the asset being leased, the residual or terminal value of the leased asset goes to the lessor.H

^Van Horne, Financial Management and Policy, 3rd ed. , p. 577.

^Ibid. ^Ibid., p. 579. ®Ibid. ®Ibid.

l^Ibid., p. 580-81. ^^Ibid., p. 583. 36

2, Interest cost of leasing. The interest cost for leasing is usually higher than the interest cost of debt.12

There are two major methods utilized to analyze the alternatives of leasing and borrowing. The first of these is the present-value analysis of alternatives. In this pro­ cess, the cash outflows of each alternative are analyzed with the lowest present value being the most desirable. Below is the formula used for this method:

NPV = Z t=o (1 +

NPV = Net Present Value A = Cash outflow for period 13 k = Discount rate

The second method used is internal rate of return analysis. By computing the internal rates of return, a rate of discount that equates the value of lease payments can be arrived at. The equation used for this procedure is as follows :

n Lt n T(Lt - Pt) ^o ^=0 (l+r)t ’’’ ^=o (1 + r) ^

A = Cost of the asset to be leased n = Number of periods to the end of lease L = Lease payment at the end of period ^ T = Corporate tax rate

, p. 586-87. 37

P = Depreciation in period ^ that would .. be applicable if the asset were owned r = Internal rate of return

The Circle K Corporation has found the sale^leasebaçk

arrangement to be very profitable for accelerated growth and

expansion. David Barker, Area Circle K Manager for Montana,

Northern. Idaho and Eastern Washington, stated that by build­

ing stores, selling them, and then leasing them back, the flow

of capital is such that a procedure of reinvestment goes on

and on allowing the establishment of new stores at a rapid pace. All leasing arrangements are culminated at the corpor­

ate headquarters in Phoenix, Arizona. As stated in the intro­

duction, the main leasing agent is Chrysler Realty which is a

subsidiary of Chrysler Corporation, the automotive giant.

A realistic example of a lease agreement between the

Circle K Corporation and a lessor has been assembled by util­ izing realistic financial figures supplied by Mr. M. J. Mead,

Montana Division office manager for Circle K.

The price of an average store and associated property is $60,000. At the present time, the average lease on a store is for a period of twenty years with three five-year options extended to the basic term of the lease. The lessee (Circle K

Corporation) has the choice of exercising the extended options.

If the option is to be taken, the lessee will supply the

l^Ibid., p. 588-89.

^Interview with David Barker, 22 November 1974. 38 lessor with a written notice ninety days prior to the expir­ ation of the primary lease.

The tables in Appendix 6 illustrate the different methods utilized in order to make a decision whether to lease or use debt financing. The following information given me by

Mr. Mead is typical of an average Circle K store and is the basis for the data presented in Appendix 6.

Cost of asset $60,000 Economic life 20 years Percentage rate of lease 8% of cost plus 2% gross sales Interest rate of debt 10% Tax rate 50% Opportunity cost of funds 10% after tax

With the data presented above, calculation of lease payments and loan payments are as follows:

Calculation of Lease Payment: 19 X $60,000 = z t=o (1 .08)t

$60,000 = X + 9.6036

60,000 X = 9.6036

X = $6,248 (lease payment per year) plus $3,600

Total payment = $9,848

^^Interview with M. J. Mead, Circle K Corporation, Great Falls, Montana, 5 December 1974. 39

The $3,600 figure is 2 per cent of the average break­ even gross sales of $180,000 per year. The 2 per cent of gross sales figure is stipulated in the lease agreement and

is a bonus for Chrysler Realty in addition to the normal

lease payment.

Calculation of Loan Payment:

20 $60,000 = z t=l (l.lO)t

$60,000 = y + 8.5136

y =----60,0002----- ^ 8.5136 y = $7,048 (loan payment per year)

Table 1 in Appendix 6 illustrates the schedule of cash outflows using the leasing alternative. Note that the present value of cash outflows over the twenty year period totals

$50,271. In order to calculate the present value of cash out­ flows using the debt financing alternative, the interest pay­ ments must first be calculated. Table 2 illustrates the annual interest charges for the twenty year period. Now that the interest has been calculated, it can be used in Table 3 to aid in the calculation of the present value of cash out­ flows using debt financing. Notice that the total present value of cash outflows over the twenty year period using debt financing is $26,758. By comparing the present value totals in Tables 1 and 3, the debt financing alternative seems to 40

be more attractive due to a smaller figure for total cash

outflows.

The next method of decision making utilized is the

internal rate of return analysis method. In Table 4, the

cash flows are presented for the twenty year period. By

solving for the rate of discount in Table 5, we find it to

be 9.70 per cent. This is the after-tax cost of lease fin­

ancing. The after-tax cost of debt financing is the before­

tax interest cost times one minus the tax rate. Thus,

10(1-0.5) = 5 per cent. Using this method of analysis, debt

financing is preferred because the effective yield is less

than that of lease financing.

The decision to lease or borrow can be made taking the

lowest present value of cash outflows or the lowest after-tax

internal rate of return. The internal rate of return method

is favored because it does not require one to specify a dis­

count rate.

It is evident from discussions with both Mr. Mead and

Mr. Barker that they feel that lease financing of the stores

gives them more operating latitude since all monies are not

tied down in debt financing although the data presented

favors debt financing. By leasing, the expenses incurred in

lease payments amount to a sizeable tax deduction for the cor­ poration. The number of stores now in operation in the cor­ poration number almost one thousand at this time and they

generated an after-tax net earnings of $4,7 51,084 in the year

ended April 30, 1974. The Circle K management has adopted a 41 policy of rapid expansion. An example of this expansion would come in late 1975 with the opening of approximately fifteen new stores in Central and Eastern Montana. The company would continue to build stores on specially selected sites for sale- leaseback procedures, keeping sales and profits uppermost in mind.

1 7 Interview with David Barker, 22 November 1974. CHAPTER VI

SUMMARY

The structure of the Circle K Corporation has grown at a rapid pace during the past few years. Being located in the western part of the United States has been a detriment in the aspect of high costs due to the transportation rates charged for merchandise to be delivered to the stores. This is especially true in Montana where towns are a great dis­ tance from each other. In an effort to solve this problem, the corporation is trying to consolidate new store construc­ tion to areas where stores are already operating or along main transportation routes in new areas.

The long operating hours and convenient suburban loca­ tions of the convenience food stores have contributed to their rapid growth. This, coupled with the consumer buying habits brought about by suburban living and increased leisure activities, justifies their sustained growth in the future.

As the Circle K Corporation grows larger, the high costs of supplying stores with inventories will undoubtedly bring about regional warehousing facilities similar to those used by the Southland Corporation and Munford, Inc.

Personnel policies are of great importance to the

Circle K Corporation. It is their intention to offer the

42 43

kind of benefits which foster good management/employee rela­

tionships. The benefit package and bonus programs help to

offset the detraction of low salaries which are common in the

convenience food store industry.

The concept of operating stores on a contract basis

went into effect on January 1, 1975. Under this kind of

operation, each store is under the control of a contract man­

ager. This manager receives a salary which is guaranteed by

the contract so that he will be able to receive a paycheck

even if his store loses money. The Circle K Corporation

feels that by using a contract operation of stores, the mana­

ger will take pride in the operation and produce greater pro­

fits for the company and himself. Depending on the sales of

the store, the corporation receives from 12 per cent to

13.5 per cent of the gross sales. Anything left over goes

to the individual store manager. Another important aspect

of the contract operation is that the zone manager will be­

come more of an advisor for the stores assigned to his zone.

Under such a capacity, the corporation feels that existing

zones can be consolidated thus reducing the number of zone managers by approximately 40 per cent to 50 per cent. Since

the zone managers are paid from money in the general and ad­ ministrative account, this will substantially reduce that

expense. A copy of such a contract is supplied in Appendix 7.

The financial stability of the Circle K Corporation is very sound. Tables 1 through 6 of Appendix 8 present pro

forma information, trend analysis, and operating ratios for 44 the Circle K Corporation and Munford, Inc. These two com­ panies were chosen for comparison due to their similarity in size. With the aid of Dr. Roger Hayen of the University of Wyoming, the computer program entitled FIAN was utilized to present the data shown in the tables previously mentioned in Appendix 8. The trend analysis depicts the growth of each company over the past three years. In order to make future projections of growth for each company, the computer program entitled FIPRO was used. This program used actual 1973 infor­ mation for each company and made projections for balance sheet and income statement data through 1978. It must be remembered that this program is only a projection tool and may not be accurate in the coming years. Such things as eco­ nomic conditions and corporate decisions are not considered in this program. The information obtained by the FIPRO pro­ gram can be found in Tables 7 and 8 of Appendix 8.

The management training programs used by Circle K seem to be inadequate. From discussions with the managers in the Montana area, it was evident that they do not have any training in the use of management tools to help them in decision making. The managers expressed their desires of being trained in such techniques, but stated that the only person who presently received such training was the area man­ ager. The division and zone managers are in need of a train­ ing program along these lines because they could possibly solve many problems before they got to the area manager's level. A solution would be to set aside two or three hours 45 at the weekly meetings of zone and division managers for a management tool workshop. The goal of having better train­ ed and more knowledgable managers would be well worth the training time expended. All managers interviewed expressed these desires.

Consumer reaction is of great importance to the

Circle K Corporation. There has been a great deal of study done in the measurement of attitude and awareness. Much of the current work in the use of attitude scales can be traced to L. L. Thurston and other psychometricians of the late

1920s.^ The semantic differential scale is the scale most 2 widely used in measuring attitude. It consists of pairs of antonyms placed on opposite ends of a scale. There are sev­ eral factors that should be considered in the development of a semantic differential scale. These factors are the follow­ ing: (1) whether a balanced or unbalanced scale should be used; (2) what type of scale should be used--numerical, gra­ phic, verbal or some combination; (3) number of steps on the scale; (4) whether the scale should be forced or nonforced type; (5) the selection of antonyms.^ A balanced scale has

^David G. Hughes, Attitude Measurement for Marketing Strategies, (Glenview, Illinois: Scott, Foresman and Company, 19713, p. 90.

^James F. Engle, David T. Kollat, and Robert D. Black- well, Consumer Behavior, 2nd ed. (New York: Holt, Rinehart and Winston, Inc., 1973), p. 453.

^David G. Hughes, Attitude Measurement for Marketing Strategies, p. 92. 47

the Q-Sort technique, the Staple scale, the Gultman scale

and the customer prototypes procedure.^

There are three prime methods of data collection.

These are the personal interview, the mail survey, and the 7 telephone survey. There are certain advantages and dis­ advantages associated with each survey method. The person­ al interview has the advantage of giving the best information and of having a low rate of nonresponse; it also is likely to be the most expensive and has the greatest danger of inter­ viewer bias. The telephone interview is advantageous in that it is the fastest method of obtaining information and non­ response is generally very low. Its disadvantages are that interview periods must be kept very short and questions must be short and simple. The mail survey offers relatively low cost, no interviewer bias, and affords the respondent the choice to answer at his leisure. The disadvantages of a mail survey are indeterminable bias due to nonresponse, the non­ response rate is higher than in personal (and telephone) in- g terviews, and the response is the slowest of the three methods.

The population for the study was limited to Circle K customers in the nine Great Falls, Montana stores. The method used to obtain the data for the study was in the form of the

^Engel, Kollat, and Blackwell, Consumer Behavior, p. 454. 7 Julian L. Simon, Basic Research Methods in Social Science, (New York: Random House, 1969), p . 252.

®Ibid. 48

mail questionnaire. The store clerks gave out the question­

naire to customers on a random basis and asked that they be

brought back on their next visit to the store. Fifty ques­

tionnaires were used in each store. Of 450 questionnaires

given out, 423 were completed and returned for a 94 per cent

response. This type questionnaire was chosen because of the

ease of use and the lower cost as compared to other data col­

lection methods. The aided recall technique was used to ob­

tain a measure of awareness. The semantic differential scale

was also chosen because it is widely accepted and it is rela­

tively simple, and easily interpreted. An unbalanced scale

was used to force a positive or negative opinion. A combina­

tion verbal-numerical scale was used with each scale having

six intervals and offering a no-opinion answer. The custo­

mers did not have to sign the questionnaires and were provid­

ed with an envelope in which to return the questionnaire to

the store clerk.

Studies have shown that bias can be caused by the order

in which the questions are asked, and that there is a tendency

for the person being surveyed to stay on one side of the scale when antonyms are used. To overcome bias in these areas, the

order in which questions are asked has been reversed and anto­ nyms have been reversed so that words of favorable and unfavor 9 able meanings do not appear on the same side of the scale.

9 Lee H. Mathews, Ira J. Dolich, and David T. Wilson, Analysis and Decision Making Cases for Marketing Management, (Englewood Cliffs, N.J.; Prentice-Hall, Inc., 1971), p. 55. 49

See Appendix 9 for the copy of the questionnaire used and the cover letter that accompanied it.

The results of the questionnaire showed that those questioned shop at Circle K from two to four days per week, spend approximately $1.50 per visit, and purchase gas at least one or more times per month.

Listed below are the Section 4 items from the ques­ tionnaire with the percentage of responses by each item:

Convenience 100% Ice 94 Magazines 100 Greeting Cards 73 Fresh fruits and vegetables 92 Hunting ammunition 64 Money orders 82 Cashing of travelers checks 95 Gasoline and oil 98 Sandwiches 87

From the responses given above, it is evident that the average Circle K customer is aware of the items listed.

The lowest response was to ammunition. This could be due to the number of women shopping at the stores who would not ex­ pect ammunition to be sold in a convenience grocery store.

In Sections 5 and 6, 90 per cent of the customers answered the very useful and satisfactory ratings. The other

10 per cent had ratings in the middle. There were no ratings of useless or unsatisfactory.

Overall, the customer seemed to be aware of what was offered in the average Circle K store and was content with how the store was operated. The only comments were for 50

longer operating hours and for more selection in grocery

items.

The convenience food store industry is still in the

young years of its life. From this study, it is evident

that the growth of this industry will continue for a long

period of time. As for the Circle K Corporation, the data

supplied showing its rapid growth over the past few years

is evidence of the bright future ahead. The former presi­

dent of Circle K, John Gillett, best sums up the principle by which the convenience food store industry will continue

its growth in the future with this statement:

We believe in the word convenience. Our whole philosophy is based on any product and/or service that pertains to the word convenience. We are constantly reviewing and researching new products (both grocery and non-grocery items), as well as specialized services. We have no intention of digressing from our original concept of filling a need to serve convenience to the public.10

^^"The Circle K Story," Convenience Store Journal : 20 APPENDIX 1

GROWTH CHARTS 52 1.400.000. 1396491 SOUTHLAND CORPORATION

1.350.000.

1.300.000.

1.250.000. 1228350 1,200,000 .

1,150,000 .

1 100 000 . . . 1085107

In 1,050,000 g 1,000,000 986580 •5

950,000, (D g g 900,000. ê. 874220 •P 4) 850.000,

800.000,

750.000.

700.000. 665764 650.000.

600.000. 563540 550,000

500,000* 480571

4 S O . . . o j l 1966 1967 1966 1969 1970 1971 1972 1973 53

MUNFORD INC.

198524 200,000

190.000

180.000

170,000

g 160,000 . 155219

I 150,000 . .3 140811 g 140,000 .

I 130.000. 127986 & 120.000. 116035

110,000 .

100,000 . 99,157yy,ib/

90,000 ■ 1968 1969 1970 1971 1972 1973 54

CIRCLE K CORPORATION

200,000 , 191640 190.000 ,

180.000 .

170.000 . 161408 160.000 .

150,000 •

■S. g 140,000 . g 130,000 . 128984 iS 120,000 . g 110,000,

100,000 . 93608

90.000,

80,000 ,

71008 70.000,

60,000 , 53,411

50.000 • 45310

40.000 . 1968 1969 1970 1971 1972 1973 1974 23328 55 23.000, SOUTHLAND CORPORATION

22.000.

21,000. 20366

20,000.

19.000.

18.000. 17797

17,000.

I 16,000.

I■S 15,000. 14895 •5 I 14,000.

13,000. I 12817

12,000,

11,000.

10 000 , . 9862

9.000.

8215 8.000.

7.000.

6105 6.000.

5,000_ ■ 1966 1967 1968 1969 1970 1971 1972 1973 Net Earnings Net Earnings (in thousands) (in thousands)

h-* IS) t o 0 4 0 4 4λ i n H* Is) 0 4 VI o i n o i n o i n o i n O O o o o o o O o o o o o o O o o o o o o o o O o o o o o o o o o • « •• # • • • $ «

ts) to toCT' ON ooo \ 00 ts)

to 0 4 to C7N tn o\ to ■ to to ■oto o o Z n c w z IS) *n to to t n ''J n § O' tnr t/l o « z o H* 0 4 to to "O 00 to Is) Is)

0 4 to oi to•o -'J 04 04

M to-O -IS* APPENDIX 2

GEOGRAPHICAL CORPORATION AREAS 58

SOUTHLAND CORPORATION

1973

36 States 59

1967

23 States

1962

11 States 60

MUNFORD INC.

1973

19 States 61

1972

19 States

1971

18 States 62

CIRCLE K CORPORATION

1974

12 States 63

k I 1973

10 States

1972

States APPENDIX 3

PERSONNEL EVALUATION POLICY 65

EVALUATION & SALARY PROGRAM

A program of evaluation and salary progress designed to provide our employees with a knowledge of the requirements of salary improvement, promotion and continued employment:

1st Evaluation:

Between 15 and 30 days. Complete Critical Duties Performance List. Read Policy Manual. Salary Increase may be to 32.05 upon Store Managers Recommendation (Store Managers respon­ sibility)

2nd Evaluation:

Between 30 and 90 days. Store Manager completes Evaluation Sheet #1. Salary increase may be to 32.10 upon Store Managers Recommendation (Store Managers responsibility)

3rd Evaluation & Subsequent Evaluations:

After 90 days upon request of Store Manager or Zone Manager. Store Manager completes Evaluation Sheet #2, Promotion to Assistant Manager or Senior Clerk upon Store Managers recommendation with Zone Managers concurrence. Salary range from $2.15 to 32.30.

Evaluation for Store Manager and subsequent evaluations:

Zone Manager uses Evaluation Sheet #2. Salary range from $2.35 to 32.65. 66

EMPLOYEE EVALUATION SHEET #1

An evaluation of ______in the following areas on ______1 9 __ .

1. Ability to open and close store:

2. Checking vendors:

3. Ordering:

4. Retailing:

5. Suggestive selling:

6. Attitude:

7. Reliability:

B. Customer Courtesy (greeting, helpfulness etc.):

9. Personal appearance:

10. Pride in store:

11. Recommendation:

Store Manager

Action:

Zone Manager 67

EMPLOYEE EVALUATION SHEET #2

An evaluation of ______in the following areas on 19

1. Proficiency in all phases of store operation:

2. Attitude :

3. Reliability:

4. Leadership & Initiative:

5. Sales Ability:

6. Customer Courtesy (greeting, helpfulness etc.)

7. Pride in store:

S. Comments:

9. Recommendation:

Store Manager

Action :

Zone Manager 68

FORM CK 168 CRITICAL DUTIES DEMONSTRATIONS

(EVERY CIRCLE K STORE PERSON MUST PROVE HE KNOWS THESE TASKS)

OWATCH YOUR STORE MANAGER (or Shiftmate) show you how; then 0 DO EACH DUTY YOURSELF, correctly and efficiently, checking off each; then O SHOW YOUR ZONE MANAGER you can do-each well, so he can sign you off below.

CHECK

1. STOCK LOCATIONS — On a "store welcome" tour each item should be spotted and named, all prices noted, including walk-in, back room, counter, outside. (NO ONE SHOULD LOSE A SALE BY NOT KNOWING WHETHER AND WHERE IT IS STOCKEDI)

2. CUSTOMER COURTESY — Watch the "whole bit" from greeting at door to assist to receipt, bagging, and welcoming back. (Introduce new-hires to regular shoppers.) ( DO A "WALK-THROUGH" WITH A REGULAR CUSTOMER— HE'LL BE GLAD TO HELP OUT:)

3. REGISTER RING-UP — Full demo and run-through from turning for price read-off to tax table, offering receipt, change-making, bag selection, and over-rings. (NO NEW CLERK MUST GET BAD REGISTER HABITS BECAUSE HE WASN'T SHOWN RIGHT:)

4. COUNTER SERVICES — Become "at home" finding cigs, candies, films, shells, and gifts promptly, making Frezes, controlling gas remote, suggesting specials. (CIRCLE K'S COUNTER IS FOR SALES AND SERVICE— NOT JUST FOR CHECKING AND BAGGING:)

5. CHECK ACCEPTANCE — And Credit Card procedure. À full jîemo and run-through of proper ID request, endorsement, card file for $10+, recording of checks. (LEARN WHAT CHECK TYPES AND LIMITS NOT TO ACCEPT, HOW TO REFUSE POLITELY:)

_____ 6. MONEY ORDER PROCEDURE — Watch and issue, with full policy details: cash only, full imprint, correctly positioned, never for over $200, entered on M.O. report. (LEARN HOW TO VOID, TO REDEEM, TO ACCEPT TRACING REQUEST, AND TO GUARD ALL M.O.'S.)

7. EMPLOYEE ROUTINE — A new store person should get "clued in" on work schedule, time sheet maintenance and signature, what to wear, where to park and keep purse. (READING MEMOS, DUTIES NOTES, AND EMPLOYEE PURCHASE DISCOUNT RULES ARE A MUST:)

8. BASIC STOCKING — Efficient demo of frequent walk-in tending, rotation, facing, shelving (perishables first), price-marking, counter and display re-stocking. (RE-STOCKING OF COUNTER AND WALK-IN BETWEEN BUSY PERIODS MUST BECOME A HABIT:)

9. BASIC MAINTENANCE — Demo that everyone helps clean; that it's easy with right combination of dusting, sweeping, oil mopping and wet mopping, window washing. (ALL STORE PEOPLE MUST HELP KEEP STORE-USE LIST ACCURATE AND ECONOMICAL:)

10. CUSTOMER CHALLENGE — A responsible store person must actually challenge any shoplifter spotted, any minor trying to buy beer, wine, or liquor, disorderlies. (EACH CIRCLE K STORE PERSON MUST SHOW HE KNOWS HOW TO CHALLENGE RESPONSIBLY:)

Each of these duties can be shown and done in a very few minutes. All must be completed within a new employee's first few days. This sheet, fully checked off and signed, must be placed in each employee's personnel folder before he is considered qualified.

I VERIFY THESE DUTIES HAVE BEEN SHOWN AND WELL LEARNED:

Store Manager New Store Person Zone Manager APPENDIX 4

INVENTORY PRICE MARKUP 70

CIRCLE K CORPORATION-CROSS MAKCIN- H.H.A. Rev. 5/1/74

Acnc Remedies 43 Feminine Pain Pills 35 Ointments-Ruhhs 45 Adhesives C Glue 40 Film 25 Pain ts.Hrushes 45 Antacids 35 Filters,Coffee 42=» Paper,Shelf 42* Alka-Seltzcr 30 Flashbulbs 40 Pet Supplies 45 Antiseptics 43 Flashlights 45 Plumbing Supplies 49 Aspcrgum 35 Fly Swatters 45 Powder,Hody C Talc, 35 Aspirin 30 Food Containers 42’» Razors C Blades 35 Awakener 35 Foot Aids 45 Rubbs - Ointments 45 Baby Care 35 Freezer Supplies 42=» Salt & Pepper Shkr 45 Baby Pants 40 Fuse Plugs 40 Sandpaper 45 Baby Supplies 40 • Garbage Dags 42=» Sanitary Dolts 40 Bandages 40 Garden Supplies 45 School Supplies 40 Bath Oi1 40 Glassware 45 Scour Pads ^ 45 Batteries 40 Cloves 40 Sewing Needs 48 Books,ChiIdrcns 35 Glue,Household 45 Shampoo 35 Bowls. Glass 45 Hair care 6 Combs 40 Shampoo Inst 45 Bowls, Plastic 45 Hair Coloring 40 Shave C ream 30 Brooms 45 Hair Dressing f. Crra II) Shave lot inn 30 Brushes.Household 45 Hair Set C Rinse 40 Shoe Lares PP Candles 40 Hair Spray 45 Shoes,Tennis,Lie 40 Cards.Playing 45 Headache Remedies 30 Shoe Accessories 45 Chests .Styrofoam 40 Home Permanents 40 Shoe Grease 35 Clocks 35 Hosiery PP Sleep Aids 30 Clothes Line 45 Ice Chests C Coolrs 40 Slippers C Shoes 40 Clothes Pins 40 Ice Cube Trays 45 Sponges f Soap I’ads 45 Cloths, Dish 45 Kidney Pills 35 Stationary 40 Cloths, Polish 45 Kitchen Tools 49 Suppos i tory 45 Cold Remedies 35 Laxatives 35 Sun Glasses 40 Cotton 40 Light Globes 50 Sun Tan Preparations 43 Cough Syrup 45 Lighter Fluid 35 Tacks f. Nails 45 Cough Lozenges 45 Liniments 45 V A.'1 « C A** Dental Floss 40 Lipstick 45 Thermos Dottles 45 Denture Cleaner 35 Lotions G Creams 35 Thermometers 50 Denture Adhesive 30 Make Up Aids 45 Tools,Household 15 Deodorants.Personal 30 Manicure Aids 45 Tooth Hrushes 45* Deodorizers,iiousehld 40 Hops 45 Tooth Paste 30 Diatetics,Saccharin 35 Motor Oi1 p-t' Tumblers 45 Dust Pans 45 Mousetrap 45 Twine C Rope 48 Dye 40 Mouthwashes 35 Vase]ine 40 Electrical Supplies 40 Nail Polish 45 Vitamins 43 Eye Drops 45 Nail Trimmers 45 Faucet Devices 40 Nasal Mist 45 Feminine llygeine 30 Nite Lights 50 Feminine Deodorant 30 Oil-Houschold 40-45

5 % - 10526 29% - 14005 7% - 10753 30% - 14206 EXÜMM.I:: Cost $4.27 10% - 11111 31% - 14193 Park 2-1 1 5 % - 11765 33% - 14925 Mark Up 30:, 10% - 12195 33% - 15305 20?; - 12500 37% - 15073 % X Cost f Pack - Unit Retail 21% - 12650 38% - 16129 14206 X $1.27 { 24 = .25c Unit Retail 23% - 12907 40% - 16667 23% - 13333 42% - 17241 pp = Usually Pre-Priccd 27% - 13699 43% - 17541 * = Nck CJianycs 20?; - 13009 45% - 10102 P-T = Temporary Pass Thru 49% - 19600 71

Rev. 5/1/74 CinCLK K CORPORATION-CROSS M\UC1.\S lUR Kiri’All.lNC ORDI R (AlIDES Page 2 Jam 30 Mushroom,Cannd 35 Roasting Bag 42» SIIG,\R Jcl ly 30 Mustard.Prepar 30 Rousting Wrap 42» Brown 20-25 Jello 25-30 N Cube Junket 35 Napkins.Paper 42» Raviolis 33 Frosting 25 0 Napkins,Sanity 33 Relish 33 Granulated 5-15 Kipper Snk- 33 Nuts,Shelled 33 Rhubarb 33 Powdered 20-25 Kool Aid pp 35 0 Rice Cello 33 Sweet Potato 30 L Oil, Cooking Rice,Wild 33 Swcetner Liq, 35 Lainps-Bulbs 50 Spray 30 Syrup 30 Lard 33 Oil,Household 40-45 Roast Beef 33 T Lids,Caps 40 Oi 1.Motor P-T Rug Cleaners 40 Taco Sauce 33 Lightr Fid 35 Prcstone 40 S Tamales * 33 Lqd Smoke 38 Transmission P-T Salad Dressing Tang 35 Lqd Swcelnr 35 Okra 30 Liquid 29» Tapioca 35 Logs.Brning 35 Olive Oil 35 Salmon 35 Tartar Sauce 33 Lye 33 Olives 33 Sal Soda 30 Tea 30 Lysol 33 Onions,Cocktl 35 Salt 30 Teeihin.j Bis 35 M Ovaltine 30 Salt Miniature 33 Tissue.Facial (f) 35» Mac.Canned 31 Oysters,Cannd 35 Sandwich Sauce Tissue,Toil 35» Mackerel 31 Oyster Stew 33 Sloppy Joe 33 Toharco 0 Mailed Milk 30 P Manwich 33 Chewing 23-25 Maraschino Paper,Plat,Nx 35» Sandwich Spread 20» Snufl'-Skoal 33 Cherries 35 Paper,Plat,Cup 12» Sardines 33» Snok iog 23-25 Mrshmlw Crm 33 Paraffin 40 Sauerkraut 30 Tohaseo Sec 33 Marslimlw 33 Paste Goods 33 Scouring Cl-Pd 25 m-.nnus Matches 40 Peaches @ 23-31 Shelf Paper 42» Can,:. Plain 33» Mandarin Peanut Butter 28 Shortening 15 S f f'V . rd 33 Oranges 35 Pears 33 Shr imp,Cand 35 Pnri'c 3.3 ^ Mayonnaise Peas 3U SnacK racks 3U-33 Sauce 33»VJ/ Small 15-10» Peppers,Cannd 33 Snacks,Carded 35-10 Paste 33 Large 18-20» Pepper,Ground 35 Snuff 33 Toothpicks 40 Miracle Whip Pickets 33» Soaps,Bar 23-28 Tort i I la Flour 25 Small 15-18» Pie Crust Mx 30 Sorghum 30 Towels,Paper 40 Large 18-20» Pie Fi11-Fruit 33 S.O.S. Pads 45 llandi Wipes 42» Meat Sauce 33 Pigs Feet 35 Soup Mx Or% 33 Wet 42» Meats.Canned 33 Piraientos 33» Soup Cannd 28 Towel Bolder 42» Meats Tcndz 40 Pineapple 30 Space Fd Sn 33-35 Tuna 29 Menudo 33 Pizza Mix 33 Spag Dinars 33 V MexicanFds 33 Pizza Sauce 33 Spag Cannd 31 vrGi:i-\m.F .iuick Mexican See 33 Plums 33 Spag See 33 Clamato 30 Milk Canned 18-25 Popcrn.Unpopd 33 Spanish Fds 33 Snap K Tom 33 Eagle Brnd 30 Pork 6 Beans 35» Spices © 38-40 Tomato 28 Milk.Powdr 23 Potatoes,cand 30* Spinach 30 V-8 33 Mince Meat 35 Potatoes,Dehyd 20 Sponges 45 Vienna Sausage 33 Mx Vegetable 33 Shoe String 30 Spoons.Forks 40 Vinegar 35 Molasses 30 Pot Scourers 45 Sprd.Asst Mt 33 W Mop lid, Stk 45 Potted Meat 33 Starch 25 Water,Bottled 35 Mops.Dust 45 Preserves 30 Stoel Wool 45 Water Softener 30 Muffin Mix 28 Presoak 30 Straws 40 Wool Wash 35 Mushroom See 33 Prunes,Canned 33 Shake G Bake 35 Worcester Sc 33 Puddings,Mix 25-30 Squash 30 Y Pumpkin 30 Yams,Cannd 30 Yeast,Dry . « 35 Yeas tcake 33

P-T Temporary Pass Thru c = Competitive Item PP Usually Pre-Priccd * New Change 72

3/1/. CIRCLE K CORPOHATION-CHOSS MARGINS POU RETAILING OUUER GUI MS

Aluminum Foil 33 Cake Decors 40 • Instant - Reg 15-20 Fd t'olorng 40 Ammonia 30 Cake Flour 35» Freeze Dried 15-20 Freezer S|*ly •rj Anchovies 38 Cake Frosting 25 Postum 30 Frozen Fds 3:1 Apple Butter 30 Cake Mixes 25 Coffee Cake Mix 28 Fruit Cocktl 3:'. Apples,canned 30 Candles 40 Coffee Crm Dry 25-30 Fruit Diet 2') Apple Cider 30 Candy.Bag 40 Coffee Pot Clnr 40 Fruit Drnks r.:' Apple Sauce 30 Candy,Ct Bar 35 (Ili-C) r.u Apricots 33 Cand ice Tea 30 FRUIT .1111 CK Asparagus 30 Canned Pop 30 Cookie Mix 28 Apple 33 Auto Clnr Wax 40 Canng Supis 40 Apricot 33 U Carrots Canned 31 Corn.Canned 33» Blended 33 Baby Cereal 28 Can-Veg Salad 30 Corn Bread Mix 28 Cranberry 33 Baby Diapers ©3 5 Cat Food 31» Corned Beef 33 Grape 33 Baby Food © 25-28 Cat Li tier 40 Corn Meal 33 Grapefruit 33 Baby Meats 28-30 Catsup 28 Corn Starch 35 Lemon 33 Baby Formula 20-31 Cello Beans 29 Crab Ml, Clam 38 Lime 35 Bags,Paper 42» Cereals, A11 28 Cracker Jack 31 Orange 33 Bags,Sandwich 42» Charcoal © 33 Peach 33 Bags,Garbage 42» . Char.Lighter © 35 Cracker Meal 35 Pineapple 35 Baking Cups 42» Clics Cake Mx 30 Cranbry Sauce 30 Prune 28 Baking Powder 33 Cherries,Cnd 35 Crou tons 35 Fruit Pic Fill 33 Baking Soda 33 Chix I terns,Cnd 33-35 D Fruit Salad 33 Balloons 45 Chili C.C. 33 Dates 33 Frt Glaze 35 BBQ Sauce 33 Chili Powder 38 Deli Items 33 Furn Polish 40 BEANS Chi I is,Cnd 33 Diet Sweetncrs 35 (: Pork C Beans 35» Chili Sauce 33 Deodorizers 40 Carbonzos 30 Beane Keene 35» Chinese Food 33 Detergents J B ~ C.inbii Hose 40 23-*>r. Baked C BBQ 30» Choc Bkg.Grd 33 Dtrgnts. I.iquid0 G,' 1, 3-5 Canned Pinto 30» Choc Chips 33 Devi led Ban 33 Gelatin Knr.v 3:t Green Cut 28 Choc -Syrup 28 Deviled Meat 33 Giiigrbrd Mx 20 Gr,Whl.Frch 31 Cig Papers 33 Diaper Soap 20-30 Grpirt Sec 30 Kidney 28 Cigarettes © Dietetic Fd. 33 Gravy Aids 33 Limas 30 Cigars 23 Dinners Misc. 33 Craty-Mix 33 Ranch Style 30 Cleaner,Bowl 30 Bbgr lllpr 33 Gravy Can 33 Refried 29» Clnrs,Dsfcl 33 Dishwasher Dtrgnt 28 11 Bean Dip 29 Clnrs,Glass 30 Dog Candy * 35» Hand Clnr Pd. 20 Beans Cried 29 Clnrs Metal 40 Dog Food 31» Hash 30 Beef Gravy 33 Clnrs,Oven 38 Drain Operncr 30 Health Food 35 Beef Stew 33» Clnrs,Smk Pipe 33 Dream Whip 35 Hominy 30 Beets 30 Clnrs,Tile,Bthrra 30 Dried Beef 33 Hun e\ 30 Dev,Bases 35 Clnrs,Window 30 Dried Fruits 33 Hrsiradi sh 33 Bird Seed 40 Clng,Fluid 40 Dry Sc Season 33 Hot IColi Mx 20 Biscuit Mix 28-30 Clothes Pins 40 Dye 40 Hot Sauces 33 Blackberries 33 Cocktl Sauce 33 E I Bleaches 25-30 Cocoa 30 Extracts 38-40 Ice Cm Cone 33 Bluing 33 Cntr Pnch Base 35 F Ice Crm Mxs 35 Borax 30 Chicken Broth 33» Fabric Softener 30 Ice Cm Salt 3:5 Bouillon Cubes 33 Cocoa Inst 30 Facial Tissue (c) 3.5» Ice Cm Top 33-35 Bread Crumbs 35 Coconut 33 Figs, Canned 33 Imt Extract 30-10 Bread Mixes 28 COFFEE (Ô) . 05 Floor Kax-Cln 38 Insecticide 45 Brkfst Inst 35» Sanka Grinds 10 Flour 15 Brooms 45 Sanka Inst 20 Flour.Panck 28 Bubble Bath 40

P-T Temporary Pass Thru © - Competitive I terns pp - Usually Pro-Priced • New Changes APPENDIX 5

CORPORATION GUIDELINES AND

BREAKEVEN ANALYSIS 74

TABLE 1

GUIDELINES FOR PROFIT AND LOSS CIRCLE K CORPORATION

Sales - Gas 100.00% Cost of Sales - Gas 82.00 Gross Profit - Gas 18.00

Sales - Grocery 100.00 Cost of Sales - Grocery 73.00 Gross Profit - Grocery 27.00

Total Sales - Gas and Grocery 100.00 Cost of Sales - Gas and Grocery 74.00 Gross Profit - Gas and Grocery 26.00

Salaries 9.50 Payroll Taxes 1,00 Supplies .60 Utilities 2.25 Depreciation § Amortization 1.00 Repair and Maintenance .60 Laundry .05 Cash Over and Short — - Loss on Bad Checks .10 Insurance .30 Other Necessary .20 Taxes, Licenses, and Fees .30 Equipment Rental .05 Store Rental 2.80 Insurance and Taxes .40 Total Store Expenses 19.15

General ^ Admin - Gas 4.25 General § Admin - Grocery 4.25 Other Income 2.00

Net Profit Gas 13.75 Net Profit Grocery 5.60

TOTAL NET PROFIT 6.00 75

TABLE 2

FINANCIAL DATA FOR A PROFITABLE CIRCLE K STORE (1974)

Actual Actual Guideline Data ($) Data ($)

Sales - Cas 63.851.23 100.00 Cost of Sales - Gas 45,761,99 71.67 52,358.01 Gross Profit - Gas 18.089.24 28.33 11,493.22

Sales - Grocery- 270,928.82 100.00 Cost of Sales - Grocery 193,680,35 71.49 197,778.03 Gross Profit - Grocery 77,248.47 28.51 73,150.78

Total Sales 334,780.05 100.00 Total Cost of Sales 239,442.34 71.52 247,737.23 Total Gross Profit 95,337.71 28.48 87,042.81

Salaries 28,032 .38 10.35 25,738.24 Payroll Taxes 2,888 .06 1.07 2.709.28 Supplies 1,905 .06 .70 1.625.57 Utilities 3,065 .10 1.13 6,095.90 Depreciation § Amortization 3,247 .70 1.20 2.709.28 Repair ^ Maintenance 1,171 .69 .43 1.625.57 Laundry .00 .00 135.46 Cash Over § Short (65 ,02) (.02) Loss on Bad Checks 548 .80 .20 270.93 Insurance 1,448 .42 .53 812.79 Other Necessary . 00 .00 541.86 Taxes, License, and Fees 2,530 .92 .93 812.79 Equipment Rental .00 . 00 135.46 Store Rental 6,008 .26 2.22 7,586.01 Insurance P? Taxes (Rent) 1,725 . 36 .64 1,083.72 Total Store Expenses 52,636 .77 19.43 51,882.87

General § Admin - Gas 4,517.18 7.07 2,713.67 General ^ Admin - Grocery 13,757.22 5.08 11,514.47 Other Income + 3,318.36 1.17 + 5,418.58

Net Profit - Gas 13,572.06 21.16 8,779.54 Net Profit - Grocery 14,172.84 5.23 15,172.01

TOTAL NET PROFIT 27,744.90 8.29 20,086.80 76

TABLE 3

FINANCIAL DATA FOR AN UNPROFITABLE CIRCLE K STORE (1974)

Actual Actual Guideline Data ($) Data ($)

Sales - Cas 28,880.68 100.00 Cost of Sales - Gas 20,069.28 69,49 23,682.15 Gross Profit - Gas 8,811.40 30.51 5,198.53

Sales - Grocery 105,259.61 100.00 Cost of Sales - Grocery 76,958.18 73.11 76,839.51 Gross Profit - Grocery 28,301.43 26.89 28,420.10

Total Sales 134,140.29 100.00 Total Cost of Sales 97,027.46 72.33 99,263.81 Total Gross Profit 37,112.83 27.67 34,876.48

Salaries 14,653.43 13.92 12,743.32 Payroll Taxes 1,508.35 1.43 1,341.40 Supplies 950.61 .81 804.84 Utilities 3,647.76 3.47 3,018.15 Depreciation § Amortization 4,872.36 4.63 1,341.40 Repair § Maintenance 975.41 .93 804.84 Laundry 2.13 . 00 67.07 Cash Over and Short +31.54 . 03 Loss on Bad Checks 207.28 .20 134.14 Insurance 582.78 .55 402.42 Other Necessary 76.49 . 07 207.28 Taxes, Licenses, and Fees 2,689.68 2.56 402.42 Equipment Rental .00 . 00 67.07 Store Rental 4,680.00 4.45 3,755.93 Insurance and Taxes (Rent) 1,540.56 1.46 536.56 Total Store Expenses 36,255.30 34.44 25,687.86

General § Àdmin - Gas 2,695.03 9.33 1,006.49 General ^ Admin - Grocery 5,348.61 5.08 4,473.53 Other Income +1,226.84 1.17 +2,105.19

Net Profit - Gas 6,116.37 21.18 3,971.09 Net Profit - Grocery (12,075.64) (11.47) 5,894.53

TOTAL NET PROFIT (5,959.27) (4.44) 8,048.41 77

TABLE 4

BREAKEVEN POINT FOR A PROFITABLE CIRCLE K STORE

Sales = $334,780.05

Fixed Costs Salaries - $32 @ 365 days $ 11,680.00 Payroll Tax 2,888.06 Utilities 3,065.10 Depreciation and Amortization 3,247.70 Taxes, Licenses, and Fees 2,530.92 Store Rental 6,008.26 Insurance and Taxes 1,725.36 Insurance (Liability) 1,448.42 $ 32,593.82

Variable Costs Salaries $ 16,352.38 Supplies 1,905.06 Repairs and Maintenance 1,171.69 Laundry .00 Cash Over and Short 65.02 Loss on Bad Checks 548.80 Other Necessary . 00 Equipment Rental .00 General and Administrative 18,274.40 Cost of Sales 239,442.34 $277,759.69 VC Marginal Income = 1 Sales 277,759.69 = 1 334,780.05

= 1 - .83

.17

'BEP$ = Fixed Costs 1 - Var Cost Sales 32,593.82 .17 = 191,728.35 78

TABLE 5

BREAKEVEN POINT FOR AN UNPROFITABLE CIRCLE K STORE

Sales = $134,140.29

Fixed Costs Salaries - $32 @ 365 days $ 11,680.00 Payroll Tax 1.508.35 Utilities 3,647.76 Depreciation and Amortization 4.872.36 Taxes, Licenses, and Fees 2,689.68 Store Rental 4,680.00 Insurance and Taxes 1,540.56 Insurance (Liability) 582.78 $ 31,201.49

Variable Costs Salaries $ 2,973.43 Supplies 950.61 Repairs and Maintenance 975.41 Laundry 2.13 Cash Over and Short (31.54) Loss on Bad Checks 207.28 Other Necessary 76.49 Equipment Rental .00 General and Administrative 8,043.64 Cost of Sales 97,027.46 $110,224.91

Marginal Income = 1 - VC Sales 110,224.91 = 1 - 134,140.29

= 1 - .82

.18 Fixed Costs BEPd. = 1 - Var Cost Sales 31,201.49 .18

= 173,341.61 APPENDIX 6

PRINCIPLES OF SALE/LEASEBACK 80

TABLE 1

SCHEDULE OF CASH OUTFLOWS: LEASING ALTERNATIVE 8 PER CENT

Cash Outflow (10%) End of Lease Tax After Tax Present Value Year Payment Shield (1) - (2) of Cash Outflow

0 9848 _ 9848 9848 1 9848 4924 4924 4476 2 9848 4924 4924 4067 3 9848 4924 4924 3693 4 9848 4924 4924 3363 5 9848 4924 4924 3053 6 9848 4924 4924 2777 7 9848 4924 4924 2526 8 9848 4924 4924 2297 9 9848 4924 4924 2088 10 9848 4924 4924 1898 11 9848 4924 4924 1723 12 9848 4924 4924 1566 13 9848 4924 4924 1423 14 9848 4924 4924 1295 15 9848 4924 4924 1177 16 9848 4924 4924 1068 17 9848 4924 4924 974 18 9848 4924 4924 885 19 9848 4924 4924 803 20 9848 4924 -4924 -729 50271 81

TABLE 2

SCHEDULE OF DEBT PAYMENTS 10 PER CENT

End of Interest Plus Principal Amount Annual Year Principal Payment Owing at End of Year Interest

0 _ 60,000 - 1 7048 58,952 6000 2 7048 57,799 5895 3 7048 56,530 5779 4 7048 55,135 5653 5 7048 53,600 5513 6 7048 51,912 5360 7 7048 50,055 5191 8 7048 48,012 5005 9 7048 45,765 4801 10 7048 43,293 4576 11 7048 40,574 4329 12 7048 37,583 4057 13 7048 34,293 3758 14 7048 30,674 3429 15 7048 26,693 3067 16 7048 22,314 2669 17 7048 17,497 2231 18 7048 12,198 1749 19 7048 6,369 1219 20 7048 0 637 TABLE 3

SCHEDULE OF CASH OUTFLOWS: DEBT FINANCING 10 PER CENT

(1) C2) (3) (4) 50% Cash Outflow End of Loan Tax Shield After Tax Present Value Year Payment Interest Depreciation (2)+(3) 0.5 (1) - (4) Cash Flows

1 7048 6000 3000 4500 2548 2316 2 7048 5895 3000 4448 2600 2149 3 7048 5779 3000 4390 2658 1997 4 7048 5653 3000 4327 2721 1858 5 7048 5513 3000 4257 2791 1733 6 7048 5360 3000 4180 2868 1619 7 7048 5191 3000 4096 2952 1515 8 7048 5005 3000 4003 3045 1421 00 9 7048 4801 3000 3901 3147 1335 w 10 7048 4576 3000 3788 3260 1257 11 7048 4329 3000 3665 3383 1186 12 7048 4057 3000 3529 3519 1121 13 7048 3758 3000 3379 3669 1063 14 7048 3429 3000 3215 3833 1009 15 7048 3067 3000 3034 4014 961 16 7048 2669 3000 2835 4213 917 17 7048 2231 3000 2616 4432 877 18 7048 1749 3000 2375 4673 840 19 7048 1219 3000 2110 4938 807 20 7048 637 3000 1810 5229 777 26,758

NOTE: Assume straight line depreciation. TABLE 4

SCHEDULE OF CASH FLOWS: LEASE FINANCING

CD (2) (3) (4) (5) (6) End of Cost of Lease (L-?t)Y Cash Flows Year Asset Payment Depreciation (2)-C3) (4)0Î5 (l)-(2) + (5)

0 60,000 9848 3000 9848 4924 55076 1 - 9848 3000 6848 3424 (6424) 2 - 9848 3000 6848 3424 (6424) 3 - 9848 3000 6848 3424 (6424) 4 - 9848 3000 6848 3424 (6424) 5 - 9848 3000 6848 3424 (6424) 6 - 9848 3000 6848 3424 (6424) 7 - 9848 3000 6848 3424 (6424) 8 - 9848 3000 6848 3424 (6424) 00 9 - 9848 3000 6848 3424 (6424) 04 10 - 9848 3000 6848 3424 (6424) 11 - 9848 3000 6848 3424 (6424) 12 - 9848 3000 6848 3424 (6424) 13 - 9848 3000 6848 3424 (6424) 14 - 9848 3000 6848 3424 (6424) 15 - 9848 3000 6848 3424 (6424) 16 - 9848 3000 6848 3424 (6424) 17 - 9848 3000 6848 3424 (6424) 18 - 9848 3000 6848 3424 (6424) 19 - 9848 3000 6848 3424 (6424) 20 3000 (3000) (1500) (1500)

NOTE: Assume straight line depreciation 84

TABLE 5

INTERNAL RATE OF RETURN: LEASE FINANCING

10% 9% Discount Discounted Discount Discounted Cash Flows Rate Cash Flow Rate Cash Flow

0 55076 - -_ 1 (6424) .91 5846 .92 5910 2 (6424) .83 5332 .84 5396 3 (6424) .75 4818 .77 4946 4 (6424) .68 4368 .71 4561 5 (6424) .62 3983 .65 4176 6 (6424) .56 3597 .60 3854 7 (6424) .51 3276 .55 3533 8 (6424) .47 3019 .50 3212 9 (6424) .42 2698 .46 2955 10 (6424) .39 2505 .42 2698 11 (6424) .35 2248 .39 2505 12 (6424) .32 2056 .36 2313 13 (6424) .29 1863 .33 2120 14 (6424) .26 1670 .30 1927 15 (6424) .24 1542 .27 1734 16 (6424) .22 1413 .25 1606 17 (6424) .20 1285 .23 1478 18 (6424) .18 1156 .21 1349 19 (6424) .16 1028 .19 1221 20 (6424) .15 225 .18 270 53,92# 5'7','7-6T

9 % = 57,764 57,764 10% = 53,928 -55,076 1% = 3,836 2,68#

2,688 = .70 + 9% = 9.70! 3,836 APPENDIX 7

CONTRACT AGREEMENT 86

t >• f • . . » ...... '. .» * #..... * • s~* ... • â 4 • . • .1 • IKDEX TO AGREEMENT L?&i .r' • 4 ll'- . .. li.. Ten» of Agreement^ I

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V. m m # :• < A'. / ' 87

AGREEMENT

entered into by and between ' •yThe Xlrcle< K-'.Corporatiori/-a Texas Cbrporation, hereinafter ^ called "Company", and .. ' . ’«hereinafter ,called "Contract Manager".

'■ V - ;-5 ' ■ V ;Compamy has leased or purchased real property, ■’ commonly known as.store.number . , located at y * 4 suitable for use as a con\renience-type food market. Company has V>' , ^devised a^system for operating this type of convenience market, : which system is identified by the trade mark "Circle K". -v : !r ■ . 1. : TERM OF AGREEfŒNT. Subject to the provisions - V ^herein for termination,. the term of this Agreement shall be for 1 a period commencing on the day of , and f ending on'the ; ; day of , and thereafter • • for periods-of one (1) year respectively, unless and until •• ■’■•‘terminated.by either party hereto by giving to the other party Ï ’ / at" least thirty (30) days written notice of such termination ^f'pripr. to the. anniversary date of the commencement of the term ■ Hqf this leaseV • i v •

> -During the first twelve (12) months of the term here- ‘7'’of,\which .-‘period shall be regarded'as a probationary period, • 1-^Company may : terminate .this lease at any time by giving Contract ^'Manager ten .(10) days, prior written notice of such termination, ♦ In no event,* however, shall the term of this Agreement continue tbeyond one (1) day prior to the termination^/lo matter how */caused-orXfor whatever reason, including termination by reason -^of breach,pt expiration of the Master Store Lease, if any.

; . . 2... ASSIGNMENT. Contract I-ianager shall not assign, f transfer-or‘in any way hypothecate any of his rights or interests j".under'this Agreement without the written consent of Company first ■ V-'had ,and obtained. The consent by Company to any one assignment, ‘•4'transfer qr'hypothecation shall not be construed as waiving Company's right to refuse to consent to any subsequent assign- .„;.;iaent> transfer or hypothecation. Should Contract Manager make an -*V„assignment-.for. the benefit of creditors or become bankrupt through either voluntary or involuntary «bankruptcy proceedings, •’’Company, at.its option, may terminate^all rights of Contract ’/ Manager hereunder. .

’','vh j TRADE FIXTU^s. Cpmpany has purchased (or leased) ’ trade 'fixtures which are installed in the above-described pre- _mises.as described in-thb’attached aforesaid "Exhibit A". The trade fixtures shall at all times be the sole property of the .Company,. Y Contract f-lanager shall use the trade fixtures in a careful -manner and solely . ih« connection with the normal oper­ ation of tho/store as prescribed by Company. All additions of pei*BOiial property in the‘nature of fixtures or equipment, whether, such additions^‘are made by Company or Contract Manager, shall .remain‘-or become . the property of Company. '-'i -tkJ :r - . • A?....,- - MAINTENANCE. Contract Manager, at his own expense, shall keep,the trade fixtures in good repair and condition. If, • at any time,', in the opinion of the Çonpany, the trade fixtures 88

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are not so laaintalncd and repaired#•Company» without prejudice to any of its rights or remedies# may give a three (3) day written notice to Contract Manager to repair. If Contract Mana- . ger does not comply within such period, Company may repair or cause repair to be done# and Contract Manager shall forthwith ■ pay to Company the expense of making such repairs. Contràct Manager agrees to pay for the cost of "Maintenance Service con- : tracts" which Company may from time to time secure which are generally applicable .to all stores, such as cash register and . fixture maintenance...... : wyj -v.' .5/' DEPLACEMENT OF TRADE FIXTURES. Company may# at any time, replace any fixtures with other fixtures of a simi­ lar kind and of equal or better quality. If any fixtures. In the opinion of the Company# become inadequate# obsolete or unusable# Company may replace them. Company shall at all timas have free access to the trade fixtures for inspection and to aâke repairs or replacements.

-.*• .. .. .6.- TRANSFERS OR ENCUMBRANCES. Contract Manager shall not pledgei mortgage or otherwise hypothecate, sublet or part with possession of said trade fixtures# or attempt in any .Other manner to dispose thereof# or remove the trade fixtures from said premises or suffer any liens or legal process to be incurred or levied thereon.

7. LIABILITY FOR DAMAGE OF FIXTURES. Contract Manager shall be responsible for any damage to the trade fixtures while in his possession# provided# however# that Contract Manager shall not be liable for loss thereof or injury thereto re­ sulting from fire# flood# or act of Cod.

• . : % Y ' ' , • • 8. MAINTENANCE AND REPAIR OF MARKET PREMISES. As and When required in its opinion," Company shall, at its expense, repaint the store building.(interior and exterior); Contract '.Manager shall-perform all other maintenance ând janitorial •'.service in order that the premises shall be kept in a clean, orderly and sanitary manner at all times. Working Manager shall# at his expense, repair and/or replace damaged and/or broken .doors, windows and plumbing.

■ -y-' ' '. ,9.. SECURITY DEPOSIT. Concurrent with the execution of this Agreement# Contract Manager shall pay to Company One .Thousand Six Hundred and 00/100 Dollars ($1,600.00) as a deposit and security for the full and faithful performance •by Contract Manager of all of the terms «and conditions contained -herein. Upon tezrmination of this Agreement, Conçany shall re­ -pay to Contract Manager# in accordance with final accounting thereof# the amount so deposited less'any monies then due Company by Contràct Manager. During the term of this Agreement, Company shall pay Contract Manager interest each month on .‘the amount deposited..under this paragraph. Such interest shall be paid to Contract Mahager by deducting it from the am.ount of interest due Company that month on the unpaid balance, if ainy, . of Contract Manager's promissory note, or by crediting the amount of such interest to Contract Manager's current account. .The rate of interest shall be the same as that provided in paragraph 10 of this Agreement. : .

- _ .'10. INITIAL INVENTORY. Company shall procure and de- ^liver to.said store the*initial inventory of all items. The cost to Contract Manager of such merchandise shall be computed by a 89

physical inventory taken at aàid'stôre within three (3) business )days before.or after coinmencertent of the term of this Agreement •• .;» .and using aggregate.of Company's then effective suggested •..-.retail' prices for each item in said inventory, less percent . -('-w-'ft) thereof. Such physical inventory shall be t;taken by s Coup any at its own expense. /• ' •'•■I-' ; Company shall advance to Contract Manager the sum -'T. \_of y < . XL jDollars ($'>. • , representing the aggregate of (i) the .‘cost of said-initiar inventory ($ . )? and (ii) the amount of a store change fund ($ : . . ) ; and (iii) the value of miscel­ laneous supplies on hand in said store at the commencement of ' ' this Agreement ($ • ). Contract Manager shall repay said sum as follows: . ' • . ., • " " ' i/.", " Dollars (S ) cash upon execution of this Agreement and the delivery of Contract .Manager's promissory .note for the balance. Receipt of said ^ ‘ ..Dollars ($ ) is hereby acknowledged by Company. ' Said promissory note shall be in a form approved by Company. The unpaid balance of said note shall bear'interest at a rate determined as of the first day of . each month equal to the "prime rate" of interest plus one-half . ' of one percent (0.5%) per annum.' The "prime rate" shall be rhe \ prime rate charged by the Chase Manhattan Bank of New York as of • the first banking day of each calendar month. However, the in- ' • terest charged according to said promissory note shall not e.;coed ‘ the highest rate of interest allowable by law in the state which has jurisdiction over this contract. The term of said note shall • coincide with the term of this Agreement, and the unpaid balance of said note, together with unpaid interest thereon, shall oa duo and payable in full upon termination of this Agreement for uhac- . ever cause and by whichever party.

; 11. INVENTORY VALUATION PROCEDURE. All of the in- ■(T ventories provided for in this Agreement shall be taken in /. accordance with Company's'standard inventory accounting principles. .tT h e merchandise shall be counted at its retail price. Except 'L.: as.otherwise expressly provided, the cost of the merchandise shall b e ‘determined by deducting from the aggregate retail price an amount equal to Contract Manager's gross markup. Contract !Mana­ ger's gross markup shall be the aggregate of the retail price of the msrch.andise multiplied by Contract Manager's percentage mark- ■ • up (as determined in accordance with this paragraph) .

In determining the costs of the various inventories in this Agreement, it-is estimated that Contract i-îanager's per­ centage markup will be percent ( * %).' After Contract . Manager has been a tenant in said store* under this Agreer.er.t for . six (6) months, and once every six (6) months thereafter. Company may» and upon Contract Manager's written request Company shall, , . review Contract Manager* s--records to determine whether said estimated percentage .markup conforms to the actual percentage V ’ jnarkup (as hereinafter defined). Said estimated percentage markup : shall be deemed to conform'to the actual percentage markup if the , I* latiier is within one-percentage point above or below the former. , Tf said estimated percentage markup does not conform to the actual percentage markup, then the parties hereto thereafter shall consider the Contract jîanager's percentage markup to be tho actual percentage markup rounded to the nearest one-quarter of one percent (0.25%) in determining the cost of the inventory provided for in-this Agreement. 90

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■ # - , - -, . . as used herein, ■ shall laean the overall percont^age markup experienced at said A,; ' - Store during the most-recently ended six (6) month period V * ■'computed in: accordance*with Company’s standard accounting . /. Contract Manager shall give Company and its agents and designees acess-to said store during normal business hours to take the inventories.provided for in this Agreement. Contract , Manager or his designee may observe each inventory. If Contract . .Manager observes any errors occurring during any such inventory. Contract Manager should promptly bring such to the attention of ' . the person taking such inventory» Immediately upon the conslusion of each inventory, Contract Manager shall execute a copy of the inventory summary documents and shall indicate thereon whether or not Contract Manager accepts.the physical count of the merchan- dise in said store as complete and accurate. If Contract Manager • does not accept such count as complete and accurate. Contract Manager shall note on said documents each claimed deficiency and '• •inaccuracy, bf such count. . ' : - ' ■ ' ■ y - 'i'. ■ ■ ■ In addition to the inventories expressly provided for .in this Agreement, Company may take such other physical inventories . of said store.as Company, in its sole discretion, shall deem necessary ;or convenient. '.-i

■ -ADJUSTMENT OF THE BALANCE OWING ON PROMISSORY NOTE. '• . . .' FroÀ' time to' time, but not more often than once every six (u) : . . months, .Coit^any, at. its expense, may take an inventory of the ' . . merchandise- in said store for the purpose of adjusting the t.^lance due on Working Manager's promissory note. The cost of the luci- '’chandise in this inventory shall be the aggregate of Cou'truuc - f ^Manager's retail .price , for each item of merchandise less an amount , . /equal'to Contract Manager's gross markup, a^ determined in accoi- . f.idahce with paragraph 11. hereof. • If the cost of the merchandise .;.-^in3this inventory, exceeds the cost of the merchandise in th-i -"f ’previous inventory (as-hereinafter defined) by ten percent (10%) or - . more, Contract Manager agrees to pay to Company an amounc ecual ; to‘such, increase.. Such aicount shall be paid as fol lows, as Contract Manager shall elect: (i) Cash payment; (2) increase the ! unpaid balance of Contract Manager's promissory note by such ’ amount; - oj;>( 3) a . combination of both (1) and (2) above. If the cost of the-.merchandise’ in this inventory is less than the cost ^ of the mer.cliiandise in the previous inventory by ten percent (10%) ' Or more, rthen Company' shall reduce the unpaid balance of Contract 'Manager'S:*promissory note by an amount equal to the decrease or, - if.the note has been fully paid, Company shall pay the amount of , the*-reduction ; in cash,'.Any adjustment shall be effective the first, day of-the next calendar month following the month in which this'inventory is.talcen. •

. - .'V.'-î.*-Î-• ’ ; In applying the provisions of this paragraph, the term . .v."previous* inventory" shall mean the most recent inventory where an !. adjustment .was made under this paragraph or the initial inventory (paragraph .10) if there* has been no prior adjustment.

. 3.3, MONTHLY______INVENTORY. < Company may take or cause to :'be ' taken ~at its expense, a physical inventory of said store at !,;least once 'each calendar, month. Company shall endeavor, but is •.'• pot required, to schedule the taking of these inventories so that .' • pot' less _.than twenty-fiVe (25) days and not more than thirty- Each such inventory shall 91

w m m m : reflect all items of merchandise* in said store at Contract Manager's retail prices for each such item, and the cost of the merchandise ' in each such inventory shall be the aggregate of such retail prices'less an amount equal to Contract Manager's gross

V- Any unaccounted for cash or inventory variations (cash . register overage and shortage) in excess of two-tenths (.2%) when' compared with the most recent previous monthly inventory shall, at Company' s ' option, be treated as either an addition to or dc- • duction from sales, whichever the case may be.

. The results of each such monthly inventory shall be . used to determine, in accordance with Company's standard ac^ ounting procedures, the gross profit percentage on sales at said store since the last such monthly inventory, which percentage shall then be used to determine Contract Manager's net profit as of tho end of the calendar month during which such monthly inventory is taken. If Company, for any reason, is unable to take a monchly inventory • during any particular calendar month, then Company shall use the gross profit percentage determined as a result of the most recent . previous monthly inventory of said store in determining Contract Manager's net profit for that particular calendar month. ...

. 14. ACCOUNTING AND BOOKKEEPING PROCEDURES. Company shall furnish an accounting and bookkeeping service which shall /'be used by Contract Manager in connection with the operation of

Contract Manager shall remit daily to Company or to ' ; Company's designee, on report forms provided by Company, intor- • • nation concerning all purchases, merchandise deliveries, free and • ' promotional merchandise received from suppliers, merchandise and . service sales (including credit card and check transactions), j • money order sales and such other business transactions as Cc:-pany '/:. .may from time to time request, which occurred at said store during i^jvrthe: previous day. Such remittance shall be transmitted to Company : by a means designated by Company, which may include United Seated . mail. ' ' • •• . •/

//"A-' / •; 'All merchandise and service sales at said store shall “••/'be recorded through the cash register, including merchandise i-/-taken for personal use by Contract Manager. .

-Air money, including-checks, received from all such ^ ■ ' 'merchandise sales, service sales, and money order sales (in- . A eluding .itoney order commissions) , shall *be deposited, not later , '•'than the next banking day after such «ales, in Company's account ' :\in a bank designated by C.cünpany, and.shall be credited by Cor.pany •' .to" Contract Manager's "current account. Contract Manager shall 'v--forthv;ith • transmit to Company a* true copy of the deposit receipt v;A/.’for each,such deposit/bearing the bank's deposit stamp. . ' / • ' • • •• "'v'All recei)?ts for credit card transactions at said ' • y ■ »s'^torè shall .be transmitted to Company, or to Company's designee, • '..'‘. n o t ;'later, than the next business: day after such transactions, and the amounts reflected thereon less any fees or discounts charged by the bank in connection therewith, shall be credited by Company . to Contract Manager ' s current account. Such receipts shall be ,.A .'.transmitted to Company by a means designated by Company, which 92

' ■ V^-'- - Company shall pay on Contract Manager's behalf all . .expenses of Contract Manager incurred in connection with the . ..•/operation of said store, and Company shall charge the amoimt , . thereof to the Contract Manager!s current account. Such expenses ' shall include, but not be limited to, the replacement of * inventory, , employee salaries, payroll taxes, maintenance expenses, taxes, >•' ■ license and permit fees, insurance, -utilities and services, in- terest on Contract Manager's promissory note, laundry, dues, re- ; pairs, sales taxes, the Company Charge referred to in paragraph . ' * 16 horeof, dishonored checks, and dishonored credit card receipts, vacation pay and discounts, if any.- ■ fp-'" ' ; . >•-V-- .. V • • • •, - ' ■ w .‘• •15. STORE OPERATIONS, j

•J' ; - USE. The premises shall be used solely as a con- venience grocery market and for the sale of only such types of ,merchandise as are usually sold at_convenience grocery markets .-.generally,'. The use of said premises for any other purpose rs ' . • • . expressly‘prohibited without the written consent of Company in ' .'each instance,

. - -B.' h o u r s . . The Contract’Manager shall keep the market rJ open from 7:00 a.m. to 11:00 p.m. each and every day, except • ■ as othenvise authorized by Company and Contract Manager shall give his full time to operation of the market and shall ener­ getically adopt and carry out the.recommendations and policies of • • , -^.-Company, P.V ■- ■•':•••'.

PERSONNEL.-' The Contract Manager shall maintain ' "v.. •f: a. .sufficient number of personnel to maintain a high degree of '.-•; '.-'customer service, and Contract Manager and the employees shall '• 'at. all times present a neat and clean appearance and sha-11 dress in.a manner prescribed by Company, ’ '-.V ^ ^ A; • : ADVERTISING.. Compaihy shall use its best judgment - t ;/!;'ih contracting for or employing capable perso'hs to advertise The --•,- "Circle K"./;trade name ànd to promote the sale of products at The ' ■ • . "Circle K"/.stores. All.such advertising shall be at'Company's - •-expense.' All window posters and "in-store advertising" shaii bo furnished by Company and properly displayed by the Contract

K' r.- i' E,'" EQUIPMENT S MERCHANDISE. Contract Manager shall adhere to Company's specifications as to location of trade ' fixtures, inventory, special displays, and shall purchase and offer for sale only those items'authoriaed by Company and in — ."• . the amounts and brands approved by Company and as specified in . ..Company's order guide; ; ' -.v^

>7: / T 161 , INSURANCE. "Contract Manager, at his expense, shall procure and-keep in force sufch Insurance as is required by the Master Lease'and/or such'ot^er ihsurance which, in Company's ' judgment,- is sufficient to adequately protect Conç>any and Contract Manager from liability,in'connection with operation of the stora. Company shall be named-as the additional insured in all required .insurance policies. -However,./the Contract Manager may at his •'option elect to have Company procure the required insurance to take advantage of any reduced rates obtainable under Company's blanket insurance, in. which event, the cost of said insurance ' . obtained through company shall be borne by the Contract Manager. •• J / : ' . " ■ • ....

j’ • »i-. «• . j. .V i., . ..J 93

■ '^rT: ''' !'". '17' •■ p a y m e n t o f c o n t r a c t m a n a g e r ; Company shall , quarantoo Contract Mano^r the sum of Ono Hundred Tvjonty Five and.00/100 Dollars ($125.00) per week# or $275.00 bi-monthly, minus deductions for withholding and social security. This riot anticipated on any bonus or other compensation Contract .. : Manager may. make, nor is it a draw of any kind. I / f - -, ^Company shall prepare and render a financial state- . jv'" ment to Contract Manager, effective the end of each calendar month.;,/". Such financial statement shall be delivered to Contract Manager ••within a. reasonable time ' after the end of each calendar month, ../.'j' and in no, event more than thirty (30) days thereafter. Such financial statement shall be accompanied by an amount equal to ' ‘ ' Contract Manager's bonus# if any, for that month determined '. in accordance with Company's standard accounting procedure and reduced by Contract Manager's applicable payment on the unpaid ..balance, if any, of Contract Manager's pr.omissory note, as ’it» ■'*determined in accordance with the terms of said note. •'.••<■ ' • «'•#. ... . 18. ' COMPANY CHARGE. As compensation to Company for the'usé of isaid premises, the rental of the fixtures and equip- -, ■ ment located on said premises, the license to use Company’s .‘'i'" trademarks, trade names and The Circle K system, and for the other services agreed, herein to be rendered by Company, Contract • Manager agrees to pay to Company each and every month, a per- i/ centage of Contract Manager's gross sales for that month, to 'il' . be determined in accordance with Exhibit B attached hereto and ' ' made a part hereof. Such sum shall be charged against Contract ’ \ 'Manager's current account and is referred to herein as the "Coi.ipany ' .Chargé". I: \ ' . '''■"•'. = • '/'!> •%f ; -v-ceL ; ■ .rz; "i' • : ' MERCHANDISE DISCOUNTS . Discounts received by • ( /Company as a result of~quantity purchases of products sold 'in' the Circle K stores shall be distributed to each store by -crediting Contract Manager’s current account with the ajT;Ount of ., ,'^such discounts attributable-to the purchase^of such products . ; 1.y 5;!'by Contract Manager at his store.-' Free merchandise, products 'J, and;'sums‘pf..money received from suppliers for advertising or •'•/v.' proiMtional-* purposes for which Contract Manager is not charged, ' '/ ’.and advertising allowances received, from suppliers shall be : : .included in the general advertising budget of Company. . - /llv.-' ^ .\ • : ' ;..r. r' 20; TERMINATION FOR DEFAULT. Each obligation and -/ ' /.covenant drf, Contract Manager set forth in this Agreement shall . ' be deemed a'rcondition. In the event of any default or breach ' . . of any covenant, condition or other provision of this Agreement •'"by.-Contract Manager, Company may/ in addition to its other .'.•remedies,'-..give-Contract .Manager written notice of termination .... . specifying-the default or breach .promoting such notice; and, • . unless such default or breach is .curre^ by Contract Manager within ^ : ■ . ten.'(10)-days’after such notice is given, this Agreement shall . ■ terminate/a-t the expiration'bf. such ten (10) days. Furthermore, Company, at'its electigri», may terminate this Agreement forthwith .’j ' upon written notice.-feo. Contract Manager upon the occurrence of : ; one or t ' o r e -of the following events* . * • - ' , Y ' • (a). In the- event, of,-.any default by Contract Manager ' . ; Sfter .Companynotice‘of two or more previous defaults of any ' kind, regardless of whether Contract Manager has curred such 94

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• r-’C. ïn the event Contract;'Manager sella, assigns, • /; pledges,''rnortgages, or hypothecates any of the equipment or ; ‘.-'..fixtures'.located in or about the premises, or any of the rights, , 'licenses or'interests granted in this Agreement, or attempts to ..•/.'do CO, ;or allows any'lien to attach:thereto;

■ In the event any insolvency, bankruptcy or ■' .'.'receivership proceedings are instituted b’by or against Contract v

. :^s.. ; (d) In the event Contràct Manager ceases to operate ■.said store as a coni^nience-type .food store under The Circle K system, or! abandons said store.(abandonment shall be conclusively presumed in-the event said store is not open for business during . any:period of forty-eight.(48) consecutive hours);

• Ifi the event Contract Manager fails to secure and ■ keep currently effective such licenses and permits as are re-

* (f)- In the event Contract Manager fails to remit ■ merchandise sales receipts and miscellaneous income and the face amount'of any issued money order as provided in this Agree- '.nent; ... ■....V •.

s' l' :’'• ' (?) In the event Contract Manager breaches any coven- anti'.condition or other provision of this Agreement which breach I. cannot be cured. , ! '•

- Waiver by Company of any default or defaults, or of any broach of any condition or covenant hereunder by Contract Manager shall : not be construed as a waiver of any_ other default or breach • . hereunder. .

2i.TEPJ-IINATION BY CONTRACT MANAGER. Contract Manager • may terminate this Agreement at ^ny time during the term hereof hy giving Company thirty (30) days written notice of such termination.

.22. TZRi'lIKATICN BY CQMPAZJY - FIRST 12 MONTHS. Company may terminate this Agreement without cause upon ten (10) day» written notice of termination given at any time during the first .twelve { 1 2 ) full calendar months of this Agreement.

23. HIGUT TO REENTER ON TERMINATION. In the event of Company terminating this Agreement under .paragraphs 20 22 hereof, Company, immediately upon such ^rmination, may reenter said premises and take possession of «taid premises. In the event of such reentry. Company,may buy or séll or store, for the account of Contract Manager, any personal property, stock, inventory or merchandise of Contract Manager then on said premises and Con­ tract Manager hereby appoints Company as contract Manager's agent • for such .purposes. Company* may retain out of the proceeds of any such sale any sums owing Company by Contract Manager without releasing Contract >lanager from said indebtedness except to the extent of the amount so retained. Company may, at its dis­ cretion, pay out of said premises or otherwise any taxes or contributions owed by Contract Manager which in absence of paytient would under applicable laws or regulations be an obligation of Contract Manager's successors, and Company may discharge any liens upon said goods. • Contract Manager shall reimburse Company ..for any such payment in excess of such proceeds. 95 a#'#!##''?"' Â';terTainotion;*of this Agroement shall not relieve .obligations incurred

' t. » of this Agreement, r';by expiration or .otherwise, Contract Manager shall peaceably and quietly‘surrender, and yield up to Company said store, broom :r^'clean» and in as good.order, condition and repair as the same now :\%'is' ,dr into-whicl? it-may : be put," reasonable use and wear thereof V, excepted,'Twithout notice or demand' of any kind, all notice to .'■•.quit or vacate hereby being expreissly waived.

i i - GOODWILL. It is Understood by the parties hereto '• that' the goodwill of the business and trade conducted at said .-‘store which may exist at the termination of this Agreement, whether by expiration or otherwise,. shall belong solely to Company; and to protect'Company's goodwill, Contract Manager shall keep confidential all of the business of Company and the methods -'of conducting such business and shall not do any act which would \ : be in violation of^the principles of good faith of the provisions ■ of this Agreement.' Contract Manager "understands and agrees • that; upon'expiration or termination of this Agreement, for 'whatever cause and by whatever party, no credit will be allowed . nor payment.made to. Contract Manager for goodwill.

. - 26. . CLOSING INVENTORY. ' Upon expiration or termination of this Agreement, for wüate ve r re a s on and by whichever party, .Company agrees to purchase from Contract Manager the closing . ' inventory of said store as determined by a physical inventory of the:merchandise, taken by Company at its expense. The purchase J price of such closing inventory shall be, at Company's election, .../either the aggregate of Company's then effective suggest/d retail prices for the.items of said, inventory, less percent .( %) thereof, or the aggregate of Contract Manager's retail -...prices for the items of said inventory, lesa an amount equal to r .'..••.Contract Manager's grdss markup, as determined in accordance '/•' .with paragraph 11. hereof. 'The purchase price of said inventory, . ./r;xegardless of the method of calculation, shall exclude spoiled .nerchandise and merchandise which is unsaleable, damaged. shop- \wcrn or which does not conform to the standards of paragraph ; «1.5 (A) of this Agreement. Should Contract Manager desire to otherwise dispose of such closing inventory. Contract Manager agrees to «pay to Company, at the completion of said physical - inventory, an amount equal to the price offered hereunder by ,',Conf>any, and Company shall thereupon release any financing state- . .... ment on such inventory and shall credit the amount so paid to Contract Manager's current account. * • •■•j’J. f i n a l ACCOUNTING. Uport termination of this Agree- : linent, or>upon* surrender oi^^aid premises by Contract Manager to J Company if such surrender occurs -after said termination. Company shall credit Contract Manager's-current account with the amount ' - of Contract Manager's .security deposit (including unpaid interest ' .(thereon) and the purchaiae price of Contract Manager’s closing '(inventory as ’ determined in .accordance with paragraph 26 hereof. Within sixty .(60) days.after said termination or after such surrender, .whichever occurs later,; Company shall deliver to Contract Manager a final'accounting statement along with an amount equal, to the - credit balance, if ^ y , to Contract Manager's . .ycurrent account. If Contract-Manager's current account reflects .. .••a balance due Company, such amount shall be due and payable to •Çonpany upon delivery of-such statement. i.-; mm#': It 96

.• '’îv-.S.- f. 28; NOTJCESt______, Any _ notices requiredroquir to be given *. hereunder shall be deemed to have been properly given if do- ' . * -..•'livered personally or.mailed/ postage prepaid, rotum receipt ; / '.".'^'reguested,. to the addresses below, or to such other addresses if'.' j /:! as either oartv'mav desinnate in writinrr! • .

1 ' "I'T*- f f • •• * " ^ ^ • *V ^ • •• *

m '' (b) ./CONTRACT MANAGER:' . '''' ' - 29* . SOLE AGREEMENT.'. ?his Agreement cancels and - ' '-supercedes any Agreement of prior date between the parties I'' hereto with reference to the possession of the premises heroin ; ' -described and contains all of .the covenants, stipulations, y;*agreement,•and considerations agread upon by the parties hereto • :;ÿ and no employee,, agent, or representative of Company has any authority to change, modify or alter the terms hereof, except i.' ' by written instrument. executed upon and with the same authority •' -• .as this-Agreement and neither party is nor shall be bound by , ' any^inducement, statement, representation, promise, or agreement y/:.-',. . not :in conformity berewith. v

. ; . It" is further agreed that, this Agreement shall hecoüie . ■ l>.indihg upon Company• upon execution by an authorized represen- tative of The Circle K Corporation, .. - t* ''

\ WHEREOF, the-parties hereto have executed &' ' this'.'Agreement this . >■ day of " ' '______, 19_____' ». V “*

CORPORATION -V-

MANAGER

..-'-f . V >»

m 97

v.v.^y r.^r

' •' ' '*.■ ■■ '*-i. 19 ' . before me, '" the undersigned, a Notary Public in and for said County and State, personally appeared - ■ • .'' • ■ • ' • ’ - ' " - - ; known to me (or proved to me on the oath o f ______) to be person or persons subscribed to the, within instrument, and acknowledged to me that executed the came. IK WITNESS WIEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Notary Public in and for said County and f^y Commission Expires I ' J-! V *V State. 'Mm

STATS OP . ) GSi ■ x- COVTfTY OF )' sst

On this •' Day of •'______, A. D. 19 before mo, the undersigned, a Notary Public in and-for said County and State, personally appeared *' '' ' ' " ' " ~ '» • knovm to me to be the ______^______•______of THE CIRCLE.K CORPORATION, the corporation that ' executed the within instrument, known to be the person who executed the within instrument on behalf of the corporation ,hereih named, and acknowledged to me that such corporation executed-the same,. IN.iflTf^ESS Ÿ/HEREOF, I have’l^reunto >set my hand and affixed my official. seal

said County and Ky Commission Expires! ... PICTURES

' . 'T'-r,?'.

• - - ' ' ' "• • ' ..' Charcoal Cart (Hct'al or ■

Check„^Prqtector'':/\l'^j,;. ' :* **. V<* .;■} -v'-,. •’„ . •■ Frozen Food Cabinet. V .-. • ■• • .fv-'-- '.'• - ^ Frozen Food Cabinet^'/': V; - I ‘-r-i'i-••' .•••— . • . t."'' Fire Extinguisher ' ■'- -■ i .. » _ .? .. ,< ‘ . • ....

Ice Herchandise 'c'.-'■■'■”■>.•• •’ -•■ ILaddek \ ' ' Money Chest . C '-I: K Mop & Bucket ' i. •' % Novelty Box ' - ' . Pop Cooler; , /'%'

«•■'. Befrig.'-Equip. (W-in/box %' ','and/or ’freezer), L • '_J_ • V > I.-.'.;

• Shelving - - -f , - • •■ •'• ' Shopping Cart T-é-Wi'. ; ' ; k ' > •■ • ■ ' '-Signs ‘ -'V';V- ,^'-v _ - ■ ' Slush MachinesV.'.\ .' __ Tamale Warmer', .H’tij'-;'; ; • ,;î” ' . . .. - Trash,Container. '

- ,;-.WXTN'ESS OUR HANDS this _ j day o£>^ " ' '..- ■ ■ , 19

' OPERATOR 99

•% ><‘Th(5 •following is the schedule of the Company Charges applicable •* '- .

12.0% on Gross Sales 12.2% on Gross Sales 12.4% on Gross Sa les 12.6% on Gross Sales 12.8% on Gross Sales 13.0% on Gross Sales • ••v^^;;^:;‘.".-i5,ooo.oo to.• 15,999.99. 13.1% on Gross Sales 16,000. 0 0 to- 16,999.99 13.2% on Gross Sales , ' - .-V' ^'17,000.00 to 17,9r- 13.3% on Gross Salea ' J/ ; ' V- r A'iB, 000.00 ' to - 18,9i 13.4% on Gross Sales T :'. e-\' r/=.l9,000.00 to ■ 19,9! 13.5% on Gross Sales 13.5% on Gross Sa les V:

es any previous charge ,'* accepted as,part,of the attached Agreement executed on the àay\-of -1 _ ' . ' ■ -19___ . ;,:.., ,

: .-GROSS-SALES^r ■' f ['The.Term "Gross Sales" as used in said Agreement and this Exhibit -shall Include the entire gross receipts of every kind and nature ^.^froiD «ales,.and services made 'in, upon or from said store, whathor on, credit'or for cash, in every department of said store, excepting j,, therefroin ;any rebates'or refunds to .customers, refundable deposits , oh beverage bottles, transfer or ^exchange of merchandise between '• 'said.store and any other CIRCLE K store where such transfer or exchange is.made.solely for the convenient operation of the business, ‘ of said store end not for the purpose of consumating a previous sale cr'for the purpose of depriving CIRCLE K of the benefit of .a .sale,-and.'the amount of all sales tax receipts which muse be • :.! accounted'for by CONTRACT OPERATOR to any government or govern-

CÎRCLE ^ CORPORATION y

CONTRACT OPERATOR

/ *1r APPENDIX 8

PRO FORMA STATEMENTS OF PRESENT

AND FUTURE GROWTH 101

TABLE 1

CIRCLE K CORPORATION

■ BALANCE SH EETS (COMMON SIZE) ASSETS 1971 1972 1973 S X S X S X CASH + S/T INVEST. 606 . 18 .2 9 54. 21.0 370. 7.3 ÆC. 4 NOTES RCBL 103. 3.1 152. 3.3 303. 6.0 INVENTORI ES 1 137. 34.2 1479 32.6 1921 . 37.9 TOTAL CURRENT ASSETS 1846. 55.5 2585. 57.0 2594. 51 .2 FIXED ASSETS 1887 . 56.7 2425. 53.4 3053. 60.3 LESS: ACCUM. DEPR. 557. 16.7 721 . 15.9 9 57. 18 .9 OTHER ASSETS 152. 4.6 249. 5.5 374. 7.4 TOTAL ASSETS 3328 . 100.0 4538. 100.0 5064. 100.0

EQUITIES NOTES PAYABLE 107. 3.2 7. .2 140. 2.8 ACCOUNTS PAYABLE 487. 14.6 606. 13.4 761 . 15.0 /CCnUALS 4 OTHER S/T 99. 3.0 144. 3.2 199 . 3.9 CURRENT MATURITIES 3 • • 1 12. .3 8 . .2 TOTAL CURRENT LIAB 696. 20.9 769. 16.9 1108. 21.9 BONDS AND TERM DEBT 408 . 12.3 1402. 30.9 1394. 27.5 OTHER CAPITAL* -155. “4.7 -485. -10.7 - 573 . -11.3 EQUITY 2379. 71.5 28 52. 62.8 3135. 61.9 TOTAL LIAB 4 EQUITY 3328. 100.0 4538. 100.0 5064. 100.0

«PFD> MINORITY INTERESTS, ETC.

INCOME STATEMENTS 1971 1972 1973 S X S X S X REVENUES 12898 . 100.0 16141. 100.0 19 164. 100.0 COST OF GOODS SOLD 9289 . 72.0 11761. 72.9 13684. 71.4 G & A 2776. 21.5 3357 . 20.8 4392. 22.9 SELLING £ OTHER EXP. 6. • 0 7 . .0 7. .0 FET OTHER Y OR EXP. 59. • 5 48 . .3 59. .3 INTEREST EXPENSE 30. .2 55. . 3 71 . .4 T AXES 341 . 2.6 410. 2.5 418. 2.2 NET PROFIT 515. 4.0 599 . 3.7 650. 3.4

MEMO: DEPRECIATIONS 160. 211. 255. 102

TABLE 2

TRENDS FROM THE BASE YEAR

BALANCE SHEETS

1971 1972 . 1973 ASSETS%% X CASH + S/T INVEST. 100.0 157.4 61.1 ACC. & NOTES RCBL 100.0 147.6 294.2 INVENTORI ES 100.0 130. 1 169.0 TOTAL CURRENT ASSETS 100.0 140.0 140.5 nXED ASSETS 100.0 126.5 161.8 LESS: ACCUM. DEPR. 100.0 129 .4 171.8 OTHER ASSETS 100.0 163.8 246.1 TOTAL ASSETS 100.0 136.4 152.2

EQUITIES NOTES PAYABLE 100.0 6.5 130.8 ACCOUNTS PAYABLE 100.0 124.4 156.3 ACCRUALS & OTHER S/T 100.0 145.5 201.0 CURRENT MATURITIES 100.0 400.0 266.7 TOTAL CURRENT LIAB 100.0 110.5 155.2 BONDS AND TERi-1 DEBT 100.0 343.6 341.7 OTHER CAPITAL* 100.0 312.9 369.7 EQUITY 100.0 119 .9 131 .8 TOTAL LIAB & EQUITY 100.0 136.4 152.2

*PFD, MINORITY INTERESTS, ETC.

' INCOME STATEMENTS

1971 1972 1973 % XX REVENUES 100.0 125.1 148 .6 COST OF GOODS SOLD 100.0 126.6 147.3 G & A 100.0 120.9 158.2 SELLING & OTHER EXP. 100.0 116.7 125.0 NET OTHER Y OR EXP. 100.0 8 1 .4 100.0 INTEREST EXPENSE 100.0 183.3 236.7 TAXES 100.0 120.2 122.6 NET PROFIT 100.0 1 16.3 126.3 103

TABLE 3

OPERATING RATIOS

1971 1972 1973 1 NET WORKING CAPITAL 1150.0 1816.0 1486.0 THOUS. CURRENT RATI 0 2.7 3.4 2.3 TO 1 ACID TEST RATIO 1.0 1 .4 . 6 TO 1

OWNERS EQUITY RATIO 66 .8 52.2 50.6 PERCENT LONG TERM DEBT TO NET WORTH 18.3 59.2 54.4 PERCENT

AVERAGE COLLECTION PERIOD 2.9 3.4 5.8 DAYS RECEIVABLES TURNOVER 125*2 106.2 63.2 TIMES EAYS SUPPLY OF INVENTORY 44.7 45.9 51 .2 DAYS ENDING INVENTORY TURNOVER 8 .2 8.0 7.1 TIMES AVERAGE ACCOUNTS PAYABLE PERIOD 19.1 18 .8 20.3 DAYS PAYABLES TURNOVER 19.1 19.4 18.0 TIMES

ASSET TURNOVER 3.9 3.6 3*8 TIMES Æ T PROFIT TO TOTAL SALES 4.0 3.7 3.4 PERCENT RETURN ON TOTAL ASSETS 15.5 13.2 12.8 PERCENT

EBIT TO TOTAL ASSETS 26.6 23.4 22.5 PERCENT NET PROFIT TO NET WORTH 23.2 25.3 25.4 PERCENT BASIC DEFENSIVE INTERVAL 21.4 26.7 .13.6 DAYS 104

TABLE 4

MUNFORD INC

BALANCE SHEETS (COMMON SIZE)

ASSETS 1971 1972 1973 $ % S Z S% CASH + S/T INVEST. 296. 5.6 249. 4.3 248 . 3.9 ACC. & NOTES RCBL 392. 7.4 442. 7.7 570. 9.1 INVENTORI ES 1711. 32.1 2117. 36.7 229 0. 36.4 TOTAL CURRENT ASSETS 2399. 45.0 28 08 • 48.7 3108 . 49 .4 nXED ASSETS 4219 . 79.2 4378. 75.9 48 03. 76.3 . LESS: ACCUM. DEPR. 1650. 31.0 1778. 30.8 1962. 31.2 OTHER ASSETS 360. 6.8 361 . 6.3 344. 5.5 TOTAL ASSETS 5328. 100.0 5769 . 100.0 6293. 100.0

EQUITIES NOTES PAYABLE 0. .0 0. .0 0. .0 ACCOUNTS PAYABLE 795. 14.9 928. 16. 1 1 140. 18.1 ACCRUALS & OTHER S/T 199. 3.7 232. 4.0 28 5. 4.5 CURRENT MATURITIES 95. 1.8 98 . 1 .7 127 . 2.0 TOTAL CURRENT LIAB 1089. 20.4 1258. 21.8 1 552 . 24.7 BONDS AND TERM DEBT 2083. 39.1 2103. 36.5 2348 . 37.3 OTHER CAPITAL* -422. -7.9 -408 . -7.1 -687. -10.9 EQUITY 2578. 48.4 2816. 48 .8 308 0. 48.9 TOTAL LIAB t EQUITY 5328 . 100.0 5769. 100.0 629 3. 100.0

*PFD, MINORITY INTERESTS, ETC,

INCOME STATEMENTS 1971 1972 1973 S X S X S X R EVENUES 14081. 100.0 15522. 100.0 198 52. 100.0 COST OF GOODS SOLD 9510. 67.5 10556. 68 .0 13695. 69.0 G & A 541. 3.8 569. 3.7 722. 3.6 SELLING & OTHER EXP. 3186. 22.6 3506. 22.6 4424. 22.3 NET OTHER Y OR EXP. -67 . - . 5 -72. - . 5 -99. -.5 INTEREST EXPENSE 94. .7 1 16. .7 137. .7 TAXES 232. 1.6 240. 1.5 273. 1 .4 NET PROFIT 451. 3.2 463. 3.0 502. 2.5

MEMO: DEPRECIATION» 276. 264. 282. 105

TABLE 5

TRENDS FROM THE BASE YEAR

BALANCE SHEETS

1971 1972 1973 ASSETS % % Z CASH + S/T INVEST. 100.0 84.1 83.8 ACC. & NOTES RCBL 100.0 112.8 145.4 INVENTORI ES 100.0 123.7 133.8 TOTAL CURRENT ASSETS 100.0 117.0 129.6 FIXED ASSETS 100.0 103.8 113.8 LESS: ACCUM. DEPR. 100.0 107.8 118.9 OTHER ASSETS 100.0 100.3 9 5.6 TOTAL ASSETS 100.0 108.3 118.1 EQUITI ES NOTES PAYABLE 100.0 .0 .0 ACCOUNTS PAYABLE 100.0 116.7 143.4 ACCRUALS & OTHER S/T 100.0 116.6 143.2 CURRENT MATURITIES 100.0 103.2 133.7 TOTAL CURRETvT LIAB ico.o 115.5 142.5 BONDS AND TERM DEBT 100.0 101.0 112.7 OTHER CAPITAL* 100.0 9 6.7 162.8 EQUITY 100.0 109.2 119.5 TOTAL LIAB & EQUITY 100.0 108.3 118.1

*PFD, MINORITY INTERESTS, ETC.

INCOME STATEMENTS

1971 1972 1973 Z Z Z REVENUES 100.0 110.2 141.0 COST OF GOODS SOLD 100.0 111.0 144.0 G & A 100.0 105.2 133.5 SELLING & OTHER EXP. 100.0 110.0 138.9 NET OTHER Y OR EXP. 100.0 107.5 147.8 INTEREST EXPENSE 100.0 123.4 145.7 TAXES 100.0 103.4 117.7 NET PROFIT 100.0 102.7 111.3 106

TABLE 6

OPERATING RATIOS

1971 1972 1973

NET WORKING CAPITAL 1310.0 1550.0 1556.0 THOUS. CURRENT RATIO 2.2 2.2 2.0 TO 1 /CID TEST RATIO • 6 .5 .5 TO 1

OWNERS EQUITY RATIO 40.5 41.7 38.0 PERCENT L ONG TERM DEBT TO NET WORTH 96.6 87.3 98. 1 PERC EN :

AVERAGE COLLECTION PERIOD 10.2 10.4 10.5 DAYS RECEIVABLES TURNOVER 35.9 35.1 34.8 TIMES lAYS SUPPLY OF INVENTORY 65.7 73.2 61 .0 DAYS ENDING INVENTORY TURNOVER 5.6 5.0 6.0 TIMES AVERAGE ACCOUNTS PAYABLE PERIOD 30.5 32. 1 30.4 DAYS PAYABLES TURNOVER 12.0 1 1.4 12.0 TIMES

ASSET TURNOVER 2.6 2.7 3.2 TIMES NET PROFIT TO TOTAL SALES 3.2 3.0 2.5 PERCENT RETURN ON TOTAL ASSETS 8.5 8.0 8.0 PERCENT

EBIT TO TOTAL ASSETS 14.6 14.2 14.5 PERCENT lET PROFIT TO NET WORTH 20.9 19.2 21.0 PERCENT BASIC DEFENSIVE INTERVAL 19.0 17.2 15.8 DAYS 107

TABLE 7

PROFORMA STATEMENTS FOR MUNFORD INC.

BALANCE SHEET ACTUALS PROFORMA ******* •«ASSETS** 1973 1974 1975 1976 1977 1978 C ASH 2476. 8421 . 11113. 138 06. 16499. 19192 A /R 5704. 6529. 7386. 8243. 9 100. 99 57 . INVENTORY 22899. 26277. 29727. 33177. 36627 . 40077. NET F/A 28404. 31500. 34500. 37500. 40500. 43500. OTH ASTS 3440. 3440 3440. 3440. 3440. 3440 TOTAL 62925. 76167. 86167. 96167. 106167. 116167

**LIAB & EQTYf* NOTES PAY 0 . 0 . 0 . 0 . 0 . 0 . A/P & ACC 14251. 16406. 18560. 20715. 22869. 25023 C UR MATS 1272. 0. 0 . 0. 0 . 0 L/T DEBT 23482. 23482. 23432. 23482. 23482 23482 OTH CAPTL -6876, -6876. — 68 76. -6876. — 63 7 6 . -6676. CDrt EÛTY 3079 6. 34614. 39212. 44 59 0. 50748 . 57686. #DEF(EXC> 0 . 8 540. 1 1788 . 14256. 1 59 44. 163 52 . TOTAL 62925. .76167 . 86167. 9 6167. 106167 116167

^DEFICIT MEANS ASSETS > THAN LIABS. EXCESS MEANS ASSETS < THAN LIABS.

*«INCOME STATEMENT

REVENUES 198524. 228 500. 258500. 288 500. 318500. 348 500. C G S 136951. 157665. 178365. 199065. 2 19765. 240465. (PER EXP 514 59. 59410. 67210. 75010. 82810. 90610. 0 THER y/E -990. -990. -990. -990, -99 0. -990 1 NTEREST 1374. 1303. 1303. 1303, 1303. 1303, T AXES 2734- 4377. 5097. 58 17 6537 . 7257 .

NET PROFIT 5016. 4755. 5535. 6315. 709 5. 7875. D EPR 2815. 3100, 3400, 3700, 4000 , 4300, P FD DIVS 347. 347, 347, 347 , 347 347 C OM DI VS 59 0. 59 0, 590 590, 59 0 59 0,

AVAIL EDS 6894. 69 18 7998 9 078 10158 11236. 108

TABLE 8

PROFORMA STATEMENTS FOR CIRCLE K CORPORATION

BALANCE SHEET ACTUALS PROFORMA ******* ******* ♦•ASSETS** 1973 1974 197 5 1976 1977 1978 CASH 369 6. 19223. 21704. 24185. 26666. 29 147. A /R 3025. 3524. 4000. 4476. 49 52. 5429 . I NVENTORY 19209. 22517. 25560. 28603. 31646. 34689. ^ET F/A 20965. 25000. 29000. 33000. 37000. 41000. OTH ASTS 3736. 3736. 3736. 3736. 3736. 3736. TOTAL 50631. 74000. 84000* 94000. 104000. 1 14000.

**LIAB & EOTY** NOTES PAY 1400. 1400. 1400. 1400. 1400. 1400 . A'P 4 ACC 9 597 . 11055. 12549. 14042. 15536. 17030. C UR MATS 75. 0. 0. 0. 0. 0. L /T DEBT 13937. 13937. 13937. 13937. 139 37. 13937. CTH CAPTL -5731. -5731. -5731. -5731. -5731. -5731. ODM EQTY 31353. 36979. 43542. 51040. 59 47 D. 6 G 8 4 5 . # DEF( FXC) 0. 16360. 18204. 19311. 19333. 18 519 . TOTAL 50631. - 74000. 84000. 94000. 104000. 1 14000.

#DEFICIT MEANS ASSETS . > THAN ilABS. EXCESS MEANS ASSETS < THAN LIABS.

••INCOME STATEMENT .

REVENUES 19 1640. 222000. 252000. 282000. 312000. 342000. C G S 136836. 157620. 178920. 200220. 221520. 242820. (PER EXP 43992. 51060. 57960. 648 60. 7 1760. 78660. 0 THER Y/E 594. 594. 594. 594. 594. 594. INTEREST 710. 707. 707 . 707 . 707 . 707. TAXES 4180. 6333. 7197 . 8061 . 8925. 9789 .

NET PROFIT 6516. 6874. 7810. 8746. 9682. 10618. DEPR 2551. 3000. 3500. 4000. 4500. 5000. P FD DIVS 0. 0. 0. 0. 0. 0. C OM DIVS 1248. 1248. 1248 . 1248 . 1248 . 1248.

AVAIL FDS 7819. 8626. 10062. 11498. 12934. 1437 0. APPENDIX 9

QUESTIONNAIRE {E CIRCLE K CORPORATION CONVENIENCE FOOD STORES 815 10TH AVENUE N.W. P.O. BOX 2248 GREAT FALLS, MONTANA 59404 TELEPHONE (406 ) 761-4452

Dear. Customer:

You have been selected to participate in a survey of the Circle K Corporation.

Will you cooperate by completing the attached questionnaire and returning it on your next visit to the Circle K store?

The results of this survey will help the Circle K Corporation in determinging future policies and programs to serve our customers better.

Your cooperation is greatly appreciated.

Sincerely yours,

CIRCLE K CORPORATION

110 Ill

CUST0I4ER QUESTIONNAIRE

These questions, which should only take a minute or two to answer, are designed to tell us how we can serve you better. For that reason, it is important that you answer all questions completely and frankly and that you return the completed ques­ tionnaire as soon as possible.

1. How many days per week do you shop at a Circle K store?

2. Approximately how much money do you spend on items when you shop at Circle K?_____

3. Do you purchase gasoline at Circle K one or more times per month?_____

4. Please check all of those goods and services which can be found at a Circle K store.

Convenience Ice Magazines Greeting Cards Fresh fruits and vegetables Hunting ammunition Money orders Cashing of travelers checks Gasoline and oil Sandwiches

5. In your opinion, what are the most useful Circle K goods and services? Circle the number which expresses your opinion of each of the following. (Circle only one rating on each line.) Very No Useful Useless Opinion Convenience 6 5 4 3 2 1 0 Ice 6 5 4 3 2 1 0 Magazines è 5 4 3 2 1 0 Greeting cards 6 5 4 3 2 1 0 Groceries 6 5 4 3 2 1 0 Beer, milk and other beverages 6 5 4 3 2 1 0 Hunting ammunition 6 5 4 3 2 1 0 Money orders 6 5 4 3 2 1 0 Cashing of travelers checks 6 5 4 3 2 1 0 Gasoline and Oil 6 5 4 3 2 1 0 Sandwiches 6 5 4 3 2 1 0 112

6 . Please rate each of the following; aspects of the Circle K store. Unsatis­ Satis­ No factory factory Opini Location of store 6 5 4 3 2 1 0 Attractiveness of store 6 5 4 3 2 1 0 Cleanliness of store 6 5 4 3 2 1 0 Efficiency of store clerk 6 5 4 3 2 1 0 Courtesy of store clerk 6 5 4 3 2 1 0 Selection of grocery items 6 5 4 3 2 1 0 Hours of operation 6 5 4 3 2 1 0 Type and quality of advertising 6 5 4 3 2 1 0

7. Are there any other goods or services you would like to see offered by your Circle K store? Please add any com­ ments you would like to make.______

Thank you for your cooperation. SOURCES CONSULTED

Annual Reports

Circle K Corporation, Annual Report, 1974,

Circle K Corporation. Annual Report, 1973.

Circle K Corporation. Annual Report, 1972.

Munford, Inc. Annual Report, 1973.

Munford, Inc. Annual Report, 197 2.

Munford, Ihc. Annual Report, 1971.

The Southland Corporation. Annual Report, 1973.

The Southland Corporation. Annual Report, 197 2.

The Southland Corporation. Annual Report, 1972.

Books

Committee, Thomas C. Managerial Finance for the Seventies. New York; McGraw-Hill, Inc., 1972.

Engel, James F .; Kollat, David T.; Blackwell, Roger D. Consumer Behavior. 2nd ed. New York: HoltRinehart and Winston, Inc., 1973.

Hughes, David G. Attitude Measurement for Marketing Stra­ tegies . Glenview, Illinois : Scott, Foresman, and Company, 1971.

Mathews, Lee H.; Dolich, Ira J .; Wilson, David T. Analysis and Decision Making Cases for Marketing Management. Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1971.

Simon, Julian L. Basic Research Methods in Social Science. New York : Random House, 1969.

Van Horne, James C. Financial Management and Policy. Engle wood Cliffs, N.J.: Prentice-Hall, Inc., 1974.

113 114

Interviews

Barker, David. Circle K Corporation, Great Falls, Montana. Interviews, 7 July 1974 and 22 November 1974.

Dodge, Guy. Circle K Corporation, Great Falls, Montana. Interview, 28 January 197 5.

Mead, M. J. Circle K Corporation, Great Falls, Montana. Interview, 5 December 1974.

Publications

"Annual Convenience Stores Franchise Guide." Convenience Store Journal 9 (September 1973): 34-35.

"Circle K." Standard American Stock Exchange Stock Reports. New York : Standard and Poor’s Corporation, 11 Septem- ber 1973.

"Circle K Box Score." Counter Talk 10 (October-November 1973): 1.

"Circle K Moves Into Utah." Counter Talk 10 (October- November 1973): 4.

Circle K Policy and Procedures Guide. 1973.

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